J.Jill, Inc. Aktie

Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Inc. First Quarter 2026 Earnings Call. [Operator Instructions] Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings.

The forward-looking statements made on this recording are as of June 10, 2026, and J.Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted or non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued June 10, 2026. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, CEO and President. You may begin.

Good morning, and thank you for joining us. As I have said on previous calls, J.Jill is in the early stage of evolving both the brands and the business amidst the dynamics of a complicated external environment. We began 2026 with a sharp focus on expanding the customer file, making progress through disciplined execution in 3 key areas: evolving our product assortment, enhancing the customer journey and advancing the way we work. This strategic framework is essential to build a solid foundation for sustainable long-term growth.

Evolution takes time and requires patience as our product and marketing strategies are introduced to both new and existing customers. Insights gained in the first quarter, particularly in stores where customers can touch, feel and experience our new assortment, supported by our exceptional sales associates, give us confidence in our ability to achieve success. We delivered first quarter results in line with our expectations for both sales and profitability. And while it was a challenging period for a number of reasons, we are actively applying learnings that should continue to drive momentum throughout the rest of this fiscal year and beyond.

We know through both customer research and feedback from our sales associates that customers want J.Jill to evolve as their approach to building a wardrobe has evolved. But we also know that we must take care with the pace and scale of that change. We are being thoughtful about infusing newness while retaining the essential elements our most loyal customers value.

From a product perspective, our assortment in Q1 reflected the start of a transition, still dominated by legacy product, but with some new styles and silhouettes representing where we are headed. Notable successes in the quarter were jackets and accessories. Accessories are only a small part of the business today, but they showed strong growth, and we see more opportunity. As we know, accessories are often an entry point into a brand for new customers or an impulse purchase that reactivates lapsed customers. In terms of key learnings, tops assortment skewed too far into shorter length and did not offer enough breadth in print.

Another highlight in the quarter was our new-to-brand customer acquisition, which had slight year-over-year growth, driven primarily through the retail channel. Our store teams continue to perform at a high level, engaging existing, returning and new customers and doing a great job speaking to the brand's evolution. We saw a meaningful improvement in the profile of these new customers who are younger than our existing customers' average age.

While the new-to-brand segment of our customer file remains relatively small, we believe its growth is key to our long-term success. This progress is encouraging. We are also leveraging learning to make enhancements to our e-commerce site, such as fabric guides, look books and stronger product storytelling, all of which help to educate online customers on our product evolution, the way our sales associates are already doing in-store. While the e-commerce channel continues to be more price sensitive, we expect these new tools and enhancements to more fully animate our product assortment and move someone from discovery to purchase.

Turning to our 3 key areas of focus. First, evolving our product assortment. We are excited by customers' initial reactions to our summer assortment so far in the second quarter. These assortments reflect better alignment between our merchandising and design teams, represent a real step forward in terms of product evolution and are a good indication of where the brand is headed. These positive early reads are encouraging and position us for gradual sequential improvement in the second quarter and further throughout the remainder of the year as indicated in our guidance.

Second, enhancing the customer journey. As part of our plan to reinvigorate the brand and expand the customer file, we have already begun to enhance how people engage with J.Jill across channels. During the quarter, we saw growth in the SMS file. And in March, we launched a new nontender loyalty program called J.Jill Collective to a small subset of our customer base. We have plans to roll this out and we'll share more in the coming months.

Leading this program and all customer and marketing strategies is our new Chief Marketing Officer, Kimberly Wallengren, who joined us at the end of April. Previously with Coach and American Eagle, she brings a proven track record of leveraging marketing to drive brand evolution, boost relevance and broaden the customer base. Kimberly's expertise is perfectly matched to our objectives, and we are delighted to welcome her to J.Jill.

Our third area of focus is advancing the way we work. In addition to developing the right strategy, we have also been building the right capabilities. Our executive leadership team has the right balance of institutional knowledge, new insights and transformation experience to deliver on this strategy. Our strategies and capabilities will also be reinforced with new tools, starting with a merchandise planning and allocation system later this year.

The new system will move us from a manual and time-intensive approach to one with more predictive and data-driven forecasting that will allow us to better assess demand planning and allocate more effectively, which we expect will support higher full price sell-through and greater markdown yields beginning in earnest in 2027.

In summary, we are still in the early days of our transformation, but I'm encouraged by our progress and the discipline with which our team is executing against our strategic priorities. With that, I'll turn it over to Mark to speak to the details of the financials and our outlook.

Thank you, Mary Ellen, and good morning, everyone. I'll begin with a review of first quarter performance before discussing our outlook. Regarding first quarter, total company sales for the quarter were about $144 million, down 6% compared to Q1 2025, inclusive of total company comparable sales decline of 8.7%, which was partially offset by sales from new stores opened last year.

Retail sales for Q1 were down about 4% compared to Q1 2025, driven by soft conversion, partially offset by higher average unit retails and supported by net 6 new stores compared to the first quarter of 2025. Direct sales were down approximately 8% compared to Q1 2025 and represented about 46% of total sales. Sales declines were driven by conversion and a mix to markdowns as consumers continue to demonstrate price sensitivity, especially in the direct channel.

Q1 total company gross profit was about $98.7 million, down about $12 million compared to Q1 2025. Gross margin rate for Q1 was 68.3%, down 350 basis points versus Q1 2025, driven by approximately $4.7 million in net tariff costs and a higher mix of markdown sales, primarily in the direct channel. SG&A expenses for the quarter were about $90 million compared to approximately $91 million in Q1 2025. Lower marketing costs driven by a timing shift of the April catalog into May, lower G&A overhead and lower technology project costs were all partially offset by new store costs, occupancy inflation and merit increases.

Adjusted EBITDA for the quarter was $16.7 million compared to $27.3 million in Q1 2025. Interest expense was $1.9 million in Q1 compared to $2.8 million in Q1 2025. Adjusted net income per diluted share was $0.45 compared to $0.88 last year, which reflected a diluted share count of 15.0 million shares this year versus 15.4 million shares last year. During the quarter, we repurchased 68,500 shares for approximately $790,000. And as of today, we have approximately $13 million remaining on the $25 million share repurchase authorization.

Turning to cash flow. For the quarter, we generated about $1.7 million of cash from operations, resulting in ending cash of about $36.3 million. Free cash flow was an outflow of $1.1 million in the quarter. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures, adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations.

Looking at inventory. Total reported inventories, excluding tariffs, were down about 3.5% at the end of the first quarter compared to end of first quarter last year. As reported inventory, inclusive of the cost of tariffs was up 5.6%. Capital expenditures for the quarter were $2.8 million compared to $2.7 million last year. Investments were focused primarily on stores as well as the new merchandise planning and allocation project. With respect to store count, we closed 2 stores during the first quarter and opened one new, resulting in end-of-quarter store count of 255 stores compared to 249 stores at the end of Q1 last year.

Now for more on our outlook. For full year, we are reaffirming our prior guidance for sales, comparable sales, gross margin, adjusted EBITDA and free cash flow. We still expect full year sales to be flat to down 2%; full year comp sales to be down 1%, to down 3%; year-over-year gross margin to decline approximately 50 basis points; and adjusted EBITDA of $70 million to $75 million. In addition, full year free cash flow is still expected to be about $20 million.

We are continuing to invest in new stores but are adjusting our targeted net opening store count this year and related capital spend to reflect the current operating environment. As such, we now expect to spend between $20 million and $25 million of CapEx during the fiscal year compared to prior guidance of approximately $25 million, and we now expect to open between 1 and 5 net new stores this year versus prior guidance of about 5 net new stores. These expectations reflect about 6 to 8 new stores, offset by closures.

Our full year guidance reflects our expectation that strategies will show gradual improvement into Q2 before gaining more traction into Q3 and further momentum into Q4. For second quarter, we expect sales to be down 1% to down 3%, comp sales to be down 2% to down 4% and adjusted EBITDA to be in the range of $18 million to $20 million. This guidance includes the expectation for second quarter gross margin to decline approximately 100 basis points compared to last year, primarily driven by approximately $4 million of net tariff costs.

With respect to tariff refunds, though we received early in the second quarter a small portion of our IEEPA tariff refund claim, we are not assuming any refund benefit in our guidance at this time, given ongoing uncertainties related to the timing and ultimate amount of any remaining reimbursement. Embedded in our guidance is an assumed average 20% reciprocal tariff rate on applicable inventory received prior to February 28, 2026, an assumed average 10% tariff rate on applicable inventory received after February 28, 2026, through the second quarter of fiscal 2026 and an assumed average 15% tariff rate thereafter.

These assumptions equate to approximately $14.5 million of net tariff costs in our expected fiscal 2026 gross profit, down slightly versus our prior expectation with the benefit assumed to be offset by higher fuel and other input costs within our outlook.

Lastly, we remain committed to executing on our total shareholder return strategies. As announced on June 3, the Board declared a quarterly dividend of $0.09 per share payable July 8 to shareholders of record as of June 24 and we will continue to opportunistically repurchase shares, though we'll do so at an appropriate pace.

Now I'll hand it back to Mary Ellen for a few remarks before we go to Q&A.

Thanks, Mark. As our product continues to evolve and our new marketing strategies take hold, we expect to see gradual sequential improvement in our business. We are encouraged by the learnings gained in Q1 and the green shoots we have seen to date, most notably the growth in new-to-brand customers and the strength in emerging product categories. Our enthusiasm for the potential of J.Jill is balanced by an understanding that successful transformations take time. We are confident we are making the right decisions today to position the brand for sustainable long-term growth and value creation. Thank you. And now we'll take your questions.

[Operator Instructions]

Your first question comes from the line of Jonna Kim with TD Cowen.

How would you assess sort of the macro impact to your consumer in the first quarter and second quarter versus sort of assortment still that needs to improve? And could you give us a little bit more color on how Mother's Day trended for you? I know it's a big event for you. So what are some learnings from this year versus last year and how you sort of evolve that event going forward?

Thanks for the questions. I'll start with consumer. So in our most recent surveys, our consumer continues to exhibit caution and admittedly is more choiceful. But what we also see is she truly believes in the hallmarks of this brand in quality and customer service, and she is -- has had a very positive response to our latest collections.

So the way that we think about this in an environment that is challenging and promotional, we know that we need to focus internally on getting her to -- on putting product in front of her that she will respond to. And that's what we've seen really as we're heading into Q2. We're very encouraged by the latest floor sets. What I would say is that includes Mother's Day, right?

So as we entered Q2, we saw positive reads on the floor sets, certainly the one that dropped right before Mother's Day. We saw a more coordinated marketing effort this year and know that as we move forward, there is opportunity for us to continue to build on that as it is such an important holiday for us. Stores performed stronger than direct, which you would expect, again, with some activations in stores that were very positive.

Got it. Understood. And then just one follow-up. As you look at second half, I mean, you talked about gradual sort of improvement, but what really gives you confidence in that inflection? Is there a specific sort of product changes and marketing that you feel especially more optimistic on?

Sure. So yes, what I would say is, as you know, Q1 was a period of testing and learning for us. It was the start of our evolution. The product was predominantly legacy products, but we did fast track new categories, new silhouettes and really are taking the learnings from that and using them appropriately as we're moving forward. A lot of learnings around product specifics, around communications to our consumer. We talked a little bit about the direct business and really the things that we are adding in terms of the book and fabric guide to move her from consideration to conversion.

So moving forward, we're taking those learnings. We're very encouraged by current results as Q2 has kicked off, assortments, assets, and we're adjusting appropriately. So we are rebalancing where we feel that we need to. We know that we did not have enough color in the first quarter. We know that she wanted more tunics in the first quarter. These are things that we have corrected as we move into the back half of the year, and we're very excited about it.

So again, we continue to underscore that this is an evolution and that evolution takes time. All of that is implied in our guidance in a gradual sequential improvement. But the way that I would say that we are very much thinking about the product and the way that we're building our product framework and strategy is around a Venn diagram that is very much 60% of what we do will be applicable to our existing as well as new customers, and then we'll have 20% on either side where we are protecting legacy and moving forward. And what we've learned is that balance in categories where we are having an assortment of silhouettes that address the middle and both ends is where we're seeing much success.

And Mary Ellen, Jonna, I would probably just build on that from sort of the implications in the guidance. Everything that Mary Ellen said about this year and relative to how different it was this time last year, this is the first quarter now where we're fully aligned with our merchants and design teams and everything that Mary Ellen just mentioned gives us the confidence that we'll continue to gradually build this year.

As compared to last year, this time where we had a relatively new team coming together, we were in the process of working forward to this moment and the business performance actually degraded a little bit through the end of the year into Q4. So it's a combination of both of those years. And just to underscore also the ending inventory period at the end of Q1 is in a better place than it's been in a while, and we've adjusted the buys as we go forward a bit as well. So feel like -- so that supports as well some of the full price and new product strategies that we're executing.

Your next question comes from the line of Janine Stichter of BTIG.

Congrats on the progress. I wanted to ask about the direct channel. How do you think about restoring the more full price nature of that channel? Or do you think of it as remaining more of a clearance channel? And then on the stores, you lowered the outlook for new stores. Just curious how new stores are performing. Is this more a function of adding less new stores just based on the environment or anything you're seeing on the stores you're closing? Is there any changes to how you're thinking about the hurdles for closing units?

So I'll kick off and then Mark will join in for sure. On the direct channel, again, what we're seeing is stores are driving stronger results than direct at the moment. And again, we know that we are up against a promotional environment. But as I said earlier, we're very encouraged as we head into Q2 to see some improvement in full price selling. And we're actively taking steps to make sure that we can more fully engage that consumer in the lifestyle of the brand with the things that we talked about with a look book, with a fabric guide. The team has added video to the site. There are things that we're doing to really engage that customer because we know we're sitting in a promotional environment, but we know that we can stand out if we have the right product and the right messaging. So that's what I'll say about direct.

And I would just -- with respect to the store count and the capital, we just felt, Janine, at this point, it was prudent to nudge that down a bit. It's more about just the general environment and some of the uncertainty in the macro world and a little bit about some of the developments that are going on in the mall landscape, some of the remerchandising, the luxury additions, just to make sure that we're prudent in watching how those -- some of those efforts impact traffic and our customer, et cetera.

But we still feel very confident in the 300-store target we put out there before. I think more than anything, we're sort of reassessing the timing to that goal that feel like that's a very realistic goal. And overall, the stores continue to perform as we've indicated on previous calls, better in markets that we're reentering where we're kind of know the customer, the customer knows us, a little longer ramp in some of the new markets. We'll continue to prioritize where we can lifestyle centers and reentry markets and a select few new markets as well in the guide that we provided.

Great. And I know it's still early, but anything you can share on the initial pilot of the non-tender loyalty program?

Yes. So it is early days. We've had a very strong response so far. As you know, this J.Jill Collective is -- it's a vehicle that we will use to continue to engage and retain our existing customers and the response so far in terms of engagement has been very high. So we're looking forward to rolling that out to a broader group as we progress through the balance of the year.

Your next question comes from the line of Dana Telsey of the Telsey Group.

Mary Ellen, as you enhance the product, one of the categories that wasn't mentioned was bottoms. How did they do, whether in skirts or in bottoms? And as you see the continued enhancement of the product like the takeaways you had on shirts that were a little bit shorter, what -- how much should remain the core? How much should remain new? Do you think of it as a percentage? And then on new customer additions, any new demographic profile of those customers? And lastly, Mark, in terms of, I think there was some marketing that goes to the second quarter, how do you think of gross margin and SG&A, any puts and takes for Q2 and beyond?

Thanks for the question. I'll start with your first, which is around bottoms. And we saw a tougher first quarter in terms of bottoms. We saw growth in the other categories. Bottoms was tougher for us. And I think from what we've read, that seems to be an industry trend. We did see as the quarter progressed, our dress business picking up, which usually offsets bottoms, right? If they're buying one, they're generally -- don't need the other. So -- but we are -- we'll continue to watch as we move forward. That was one of the tougher categories. We saw great business in our jackets and outerwear as we keep talking about and again -- but dress is better.

To the point about core versus new, we are very measured about it. And as I mentioned earlier, we are making sure that the vast majority of what is in our assortment appeals to both customers. What we've seen is that when we then in any given category, offer a balanced assortment of silhouettes, 20% leaning toward new, 20% being very legacy, but the vast majority in the middle appealing to both, that's how we're building it.

In terms of shirtlings, it's interesting. A year ago, our business in tunics was terrible. We had a terrible season. And yet this year, when we reduced them, the consumer came back and said she wanted more choice in tunics. So that's one that's fortunately easy to rebalance. And we have done that in the back half of the year. And -- so I would say -- and color was also a very, very obvious call out that February leading into March was too neutral and our customer response to color. And again, we've seen that improve the Q2 business, and we'll watch that as a percent of the business going forward.

When -- look at new-to-brand customers, we are very encouraged for a few reasons. One, this new-to-brand customer coming in is younger than our customers' average age; and two, she's spending higher. And so both of those things encourage us. And so as we think about marketing efforts moving forward, right, we have things like the J.Jill Collective to retain our existing, we are focused on bringing new-to-brand in, but we are also focused on converting them to existing customers and keeping them within the brand. We're very excited about that set, which is growing and younger and has a high AOV.

And Dana, addressing your question on the marketing spend, we did -- so SG&A in Q1, we mentioned was down about $1 million, and that was driven in part by the catalog shift. It really was a 4-day shift or so from the last week in April into the first week in May. And that's a contributor to what I'll mention in a second in Q2 SG&A.

The other contributor to the upside in Q1 was project costs, given that last year, we were in OMS cutover in Q1. And this year, we have our merge planning allocation project going on, but it's a much lower burn rate than the final effort of OMS last year. So those were contributing factors. As you get into Q2, we'll continue to invest in marketing and then we have the timing shift. So that puts a bit more pressure into Q2 than we had in Q1. And the project costs really start to normalize year-over-year before they become a little bit of a headwind in the back half of the year.

So the modeling with the guidance we provided for Q2 with margin down about 100 bps implies that the margin tariff -- the net tariff load that we gave insight into that we're expecting with the inventory positioning and some of the progress that we're expecting to get some better performance through full price and yield. And then the model would indicate something like a few million dollar pressure most likely on SG&A in Q2. And I would say the first half net is probably a good way to model the back half SG&A as well in terms of -- relative to the prior year.

Your next question comes from the line of [indiscernible] of Jefferies.

I think you just touched on it a bit just now about second half gross margins. But can you just walk through the implied second half improvement for gross margin, especially after the improving tariff environment?

Sure, [indiscernible]. A couple of points on that, and it's -- I want to be really clear that we haven't factored anything related to refunds. We're sort of status quo to where we've talked previously about tariff load in the margin with the small exception that the 10% rates we had previously assumed would go through Q1. Now we're assuming they go through Q2, which is some upside in the tariff expectation.

We mentioned the full year load of $14.5 million. Last time we said about $15 million. It's about $1 million movement in that line, which does provide less year-over-year pressure from tariffs in Q3. And then we expect that at the current assumptions to be a tailwind into Q4. And at the same time, the inventory positioning, which ex all of the tariff load at the end of Q1 was down 3.5%. And we indicated in our press release today that we're positioning back half units down about mid-single digits.

We feel like that, along with the product strategies should help drive more fundamental margin at full price and yield across full price and markdown. So those are some of our assumptions, again, gradually improving and getting more so in Q3 and more so again in Q4, just as the product strategies solidify and we get reps under our belt with every floor set, and that's what's implied underneath the margin predominantly in the guide.

Your next question comes from the line of Marni Shapiro of The Retail Tracker.

Sorry, I had to hop on 1 or 2 minutes early -- late, sorry. I just wanted to ask, I know you had a little bit of trouble with the colors. But where you had color from my vantage point, it's sold out immediately. You had a beautiful pop of pink that came in, some blues. So was it across the board? Or when those colors came in, they sold and sold very quickly and at full price?

The latter, Marni. So yes, we struggled with color in Feb and March when it was much more neutral and the colors were muted. The minute that we dropped that pink delivery, the full price selling was very, very strong. Both pink solid and print that had pink in it followed up by a delivery that was all around a beautiful aqua color sold very strong. Then we go into Memorial Day, red, white and blue, very -- red always very strong for us. So color is working. And again, just something that we will be very cognizant of in terms of the percent of the assortment as we move forward.

Also, I felt like in and out of your stores instantaneously. Could we also just talk about the customer that's looking for the deals a little bit more? I guess, are these newer customers that are coming in online and looking for deals? Or are they across the file?

They are across the file, and it's what we've seen the last several quarters just continuing with the promotional cadence online being so elevated and remaining elevated. Again, what we know we need to do is we need to cut through, and we're seeing some encouraging results as we started Q2 with some full price selling in the direct channel, and we'll continue to really elevate that experience online. And as we bring new people in, be sure that they are having a full -- the true J.Jill experience and that they are converting at full price.

With no further questions, that concludes our Q&A session and today's conference call. Thank you for joining. You may now disconnect.

Hello, and welcome to the 2026 Annual Meeting of Stockholders of J.Jill, Inc. Please note that this meeting is being recorded. [Operator Instructions]

It is now my pleasure to turn the meeting over to Mary Ellen Coyne. Mary Ellen, the floor is yours.

Good morning, everyone. I'm Mary Ellen Coyne, Chief Executive Officer and President of J.Jill, Inc., and a member of the company's Board of Directors. I'll be presiding at this meeting, along with Michael Rahamim, the Chair of our Board of Directors. On behalf of the Board of Directors of J.Jill, I am pleased to welcome all of you to the 2026 Annual Meeting of Stockholders. It is approximately 8:30 a.m. Eastern and in accordance with the bylaws of the company, I will now call the meeting to order.

We appreciate you attending our 2026 Annual Meeting. All stockholders were given access to our proxy statement and annual report which contain information about the company and its business. Additional copies are available online.

Before proceeding to the business of the meeting, I would like to note that all members of J.Jill's Board are attending virtually. DeVonna Reed from Equiniti Trust Company, LLC, has been appointed as Inspector of Election in accordance with the company's bylaws. Also participating virtually are representatives of Grant Thornton LLP, whose appointment as the company's auditor for the 2026 fiscal year is up for ratification at this meeting, along with representatives of Hunton Andrews Kurth LLP, who served as our outside legal counsel. Kathleen Stevens, Senior Vice President, General Counsel, Secretary and ESG of the company, will serve as the Secretary of this meeting and will now cover the rules of conduct and agenda for the meeting.

Thank you, Michael. And thank you to the stockholders who are attending. The rules of conduct and agenda for the meeting should be visible to you on the platform. The meeting will be conducted in strict accordance with the rules and agenda. This meeting is held pursuant to a printed notice mailed on or about April 23, 2026. The notice went to each stockholder of record as of April 6, 2026. A list of stockholders entitled to vote at this meeting has been available for the past 10 days. All documents concerning the call and notice of this meeting will be filed with the records of the company. .

There are 14,906,245 shares of common stock issued outstanding and entitled to vote at this meeting. We were informed by the Inspector of Election that the holders of a sufficient number of shares of common stock are represented at this meeting to constitute a quorum.

Thank you. Because holders of the majority of the shares entitled to vote at this meeting are represented, I hereby declare that a quorum is present at this meeting in accordance with the company's bylaws and declare this meeting to be duly convened for purposes of transacting such business as may properly come before it.

If you intend to vote during this meeting, you may do so through the online platform. If you have already sent in your proxy card or voted online or by phone and do not want to change your vote, you do not need to do anything now.

The next order of business is a description of the matters to be voted upon at today's meeting. At this meeting, the stockholders will be asked to elect 2 Class III directors of the company and to ratify the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the current fiscal year ending on January 30, 2027.

The first proposal before the stockholders of the company is the nomination of 2 Class III directors of the company. The company has a staggered Board comprised of 3 classes of directors. The terms of the Class III directors expire by their terms at this annual meeting, and any Class III director elected today will hold office until the annual meeting held in 2029 or until a successor is elected and qualified.

To nominate the candidates listed in the proxy statement, I recognize the Chair of our Board of Directors, Michael Rahamim.

Thank you. I hereby nominate Michael Rahamim and Mary Ellen Coyne for election as Class III Directors of the company. These nominees are named and described beginning on Page 7 of the company's proxy statement.

You have heard the motion. Is there a second?

Second.

Since no other nominations have been made in accordance with the bylaws, I hereby declare the nominations closed. The election of directors is now in order. If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed. The second proposal being submitted to stockholders for action is the ratification of the appointment by the Board of Directors of Grant Thornton LLP as the independent registered public accounting firm of the company for the current fiscal year ending on January 30, 2027. I would like to call upon Michael Eck, the Chair of the Audit Committee for the recommendation of the Audit Committee and the Board of Directors in this regard.

Thank you. The Audit Committee has the responsibility of recommending auditors to be appointed by the Board of Directors. Upon recommendation of the Audit Committee, the Board of Directors unanimously voted to recommend Grant Thornton LLP as the company's independent registered public accounting firm for the current fiscal year ending on January 30, 2027. I move for the ratification of the appointment of Grant Thornton LLP to audit the financial statements of the company for the fiscal year ending January 30, 2027.

You have heard the motion. Is there a second? .

Second.

If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed.

The Inspector of Election has certified that the tally is complete. I now ask the Inspector of Election to report the results of the balloting.

The holders of a majority of the shares of common stock represented at this meeting have voted in favor of electing Michael Rahamim and Mary Ellen Coyne for election as Class III directors of the company and ratifying the selection of Grant Thornton LLP as the company's independent auditors for the fiscal year ending on January 30, 2027.

I hereby declare that the nominees for directors have been duly elected, and the appointment of Grant Thorton LLP has been duly ratified. I direct the Secretary to file the certified tally with the minutes of this meeting. There being no other business, the Annual Meeting of Stockholders has concluded.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill's Fourth Quarter 2025 Earnings Call. [Operator Instructions].

Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings.

The forward-looking statements made on this recording are as of March 31, 2026, and J.Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued March 31, 2026. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page on the website at jjill.com.

I would now like to turn the conference over to Mary Ellen Coyne, Chief Executive Officer and President of J.Jill. You may begin.

Good morning, everyone, and thank you for joining us today. 2025 marks the beginning of a strategic evolution for J.Jill. We embarked on a period of testing and learning in order to build a strong foundation for our business by expanding our customer file through product evolution, enhancing the customer journey and improving the way we work as an organization.

While we delivered fourth quarter results that exceeded the updated guidance we provided in January, the period reinforced why this evolution is essential. We had an early assortment that did not resonate as hoped. We came up against earlier and deeper competitive holiday promotions. And we watch our direct customer continue to migrate towards the promotional end of the spectrum, seeking value and discounts rather than engaging at full price. Against this backdrop, our teams remained agile and reacted in season to ensure we ended the period with inventories in a clean position.

As we enter 2026, we are taking the steps to transition and position the business for long-term growth. To achieve our objectives, we must expand our customer files. This requires patience and precision. We're expanding into new categories and modernizing our aesthetic to appeal to a broader customer base. But doing so in a way that upholds the quality, fit and values that our loyal customers expect and trust from J.Jill. That's why our test-and-learn methodology is so critical. It allows us to validate new concepts with both new and existing customers before scaling, ensuring we're building sustainable growth rather than simply pursuing short-term gains.

As we move through 2026 and beyond, you'll see us continue this balanced approach. And we believe the investments and strategic shifts we are making will position us well to achieve our objectives. This evolution will take time, and we should not expect the path to be linear. But we are committed to maintaining a disciplined operating model, carefully managing expenses and leveraging our strong financial position and strengthen balance sheet as we pursue this course.

None of this transformation would be possible without a best-in-class team. A combination of strong internal leaders with deep knowledge of J.Jill, and outside leaders bringing relevant experience and new perspectives. Throughout 2025, we've made deliberate decisions to strengthen our leadership bench by recruiting proven talent with deep expertise in brand transformation. We brought Courtney O'Connor on board in July as Chief Merchandising Officer to support our product evolution. And Viv Rettke in November as the company's first-ever Chief Growth Officer to lead our e-commerce and AI initiatives. As we grow, we will continue investing in talent that complements our existing strengths and supports new capabilities.

Turning now to our 3 key strategic pillars. First, evolving the product. In 2025, we analyzed our assortment and identified areas in which we needed to streamline, remove redundancy and evolve to capture a greater share of our customers' wardrobe. We began testing categories and concepts to expand the relevance of our product assortments. In Q4, for example, we successfully tested small capsules in areas where we saw potential but wanted to validate customer response before making larger commitments.

We also piloted a localized merchandising strategy, adjusting our assortment to better reflect the lifestyle needs of specific markets. What became clear through those tests is that when we gave our customer the newness she wanted, she responded even in a highly challenging promotional environment. These learnings shaped how we approach our 2026 assortment and are informing our broader merchandising strategy going forward.

As a reminder, our summer 2026 assortment, which will be introduced in Q2, will capture the first influence from our strengthened merchant and design team and we expect continued improvements in assortment as we move throughout the year. There will be more newness with silhouettes and fabrics as well as the beginning stages of expansion into areas of accessories such as bags and belts. Our goal is to continue to provide our loyal customer the quality and value she knows and loves us for, while introducing relevant and compelling products focused on the new customers who we aim to attract.

Our second pillar is enhancing the customer journey. This past fall, we began to look at our marketing strategy differently and how we think about customer acquisition and engagement. Historically, our marketing spend has been disproportionately focused on our existing customer base. And while customer retention remains important, we know this approach was limiting our ability to expand our customer file and drive the kind of growth we're targeting.

In 2026 and beyond, we plan to continue to rebalance our marketing investments to address the top of the funnel, building broader brand awareness and capturing new customers who may not yet be familiar with J.Jill. We believe these awareness building initiatives will help us reach a larger, more diverse audience.

Our third pillar is operational improvements. Throughout 2025, we focused on strengthening our operational capabilities and leveraging new technologies that we expect to support future growth. We successfully implemented our new OMS system, providing us with a more modern platform, and created the Chief Growth Officer role to fully maximize e-commerce and AI to help drive long-term success.

As an organization, we are embracing the capabilities and efficiencies that AI can enable. With every potential use case, we ask ourselves: will it increase revenue? Will it increase efficiency? And will it drive speed to market? As we begin 2026, we are introducing several new tools across the organization and have kicked off a significant project, the implementation of a new merchandise planning and allocation tool from Anaplan.

We plan to leverage this predictive AI-powered forecasting model to optimize how we plan and allocate inventory across the business. Thanks to the hard work of our team, we are on track to go live late in the second half of 2026 with meaningful benefits expected to begin in 2027 and we will continue to improve as the system learns and we scale it to drive better demand forecasting, smarter allocation by location and reduced markdowns.

As we look forward to 2026, we are confident in our strategic direction while being realistic about the current consumer environment, the impacts of tariffs and the work ahead. While the quarter has seen a challenging start largely driven by continued price sensitivity, particularly in our direct channel, we are encouraged by the performance in our stores supported by trained associates, providing personalized guidance and tactile experiences that excite both existing and new customers around the brand's product evolution. Importantly, we are taking key learnings from these first few weeks of the year to inform our go-forward plan, all of which is reflected in our outlook, which Mark will review.

In closing, we're viewing 2026 as a period of deliberate accelerated change to expand our customer file while maintaining our operational discipline. We remain committed to our methodical test-and-learn approach, building on validated successes around new initiatives before scaling investments. I am confident that this measured approach, combined with our strong balance sheet and operational rigor will position us to achieve our objectives and deliver long-term shareholder value.

And with that, I'll turn it over to Mark.

Thank you, Mary Ellen, and good morning, everyone. As Mary Ellen outlined, 2025 marked the beginning of a strategic evolution for J.Jill, a deliberate period of evaluation, testing and learning, that began to build the foundation for expanding our customer file.

As we enter 2026, we are deploying these learnings which while we expect will take some time to fully take hold, we are confident we'll position the business well for long-term sustainable growth. Before discussing our 2026 outlook, let me provide context on fiscal 2025, which demonstrated the resilience of our operating model even as we began this evolution and despite significant external headwinds.

We generated $23.2 million in free cash flow in the year, maintained a solid gross margin rate of 68.7% despite incurring approximately $7.5 million of incremental net tariff costs. We opened 4 net new stores, successfully upgraded our order management system and delivered adjusted EBITDA of $84.3 million on sales of $596.5 million. We also strengthened the balance sheet and returned significant capital to shareholders. We refinanced our $75 million term loan, which will save approximately $2 million in annualized cash interest expense.

We repurchased $10.4 million or about 638,000 shares of J.Jill stock and paid approximately $5 million in ordinary dividends demonstrating our ongoing commitment of returning cash to shareholders and supporting total shareholder return. These results reflect the operational discipline and agility of our organization in navigating a complex environment. The tariff policy enacted in April created unprecedented operational complexity and we experienced a slowdown in our customers' shopping behavior throughout the year, contributing to a 3% decline in comparable sales for the year.

I want to thank our vendor partners for their support amidst these challenges and recognize and thank our cross-functional teams for their agility and resilience adapting their work and processes in response to the changing business requirements. Many of the same team members manage the successful March 2025 cutover to our new OMS system, a major modernization of our technology foundation.

As we move into 2026, we are planning for a year of strategic investment and measured transition. We're building the foundation for sustainable, profitable growth by expanding our customer file, modernizing our product offering and further strengthening our operational capabilities. This requires deliberate investments that will pressure near-term profitability, but position us for stronger performance in 2027 and beyond.

Our financial approach doesn't change. We're being disciplined about where we invest, measuring returns carefully and maintaining financial flexibility to adjust as we learn. Our strong balance sheet and cash position provide flexibility to execute this strategic evolution while continuing to return capital to shareholders.

With that context, let me walk through our fourth quarter performance and then provide our outlook for fiscal 2026. Total company sales for the quarter were $138.4 million down 3.1% compared to Q4 of 2024. Total company comparable sales for the fourth quarter decreased 4.8%, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024, driven by soft traffic and conversion, which were partially offset by stronger average unit retails and average transaction values in the quarter.

Net new stores contributed approximately $2 million in revenue. Direct sales as a percentage of total sales were 53.5% in the quarter. Compared to the fourth quarter of fiscal 2024, direct sales were up 2.6%, driven by markdown sales, which benefited from ship-from-store capabilities.

Q4 total company gross profit was $87.3 million compared to $94.8 million last year. Q4 gross margin was 63.1%, down 320 basis points versus Q4 2024, driven by approximately $4.5 million of net tariff costs incurred during the quarter and deeper year-over-year discounting amidst a very competitive promotional environment. These headwinds were partially offset by favorable freight costs this year compared to last.

SG&A expenses for the quarter were about $87 million compared to $89.3 million last year as increased selling expense and G&A overhead were more than offset by lower marketing, management incentive, nonrecurring costs and stock-based compensation. Adjusted EBITDA was $7.2 million in the quarter compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4, down about $500,000 compared to last year, driven by the term loan refinance completed in December.

Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share compared to earnings of $0.32 per share in Q4 2024. Average weighted diluted share count in Q4 this year of 15.3 million shares reflected the impact of repurchasing 637,700 shares in fiscal 2025. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations.

Turning to cash. We ended the quarter and full year with $41 million of cash. For fiscal 2025, we generated $42.1 million of cash from operations and $23.2 million of free cash flow, defined as cash from operations less capital expenditures. We refinanced our $75 million term loan in December extending the term through December of 2030 and saving approximately $2 million in annual cash interest expense. The regular quarterly cash dividends totaling $5 million and approximately $10.4 million of share repurchases in 2025 were funded from cash on hand. As of January 31, 2026, there was $14.1 million of availability remaining under the stock repurchase authorization that expires in December 2026.

Looking at inventory. At the end of the fourth quarter, total inventory, excluding the impact of tariffs was about flat compared to the end of fourth quarter last year, including approximately $9 million related to net tariff costs, reported inventory at end of Q4 was up 14% compared to end of Q4 inventory last year. Capital expenditures for the quarter were $10.1 million.

Total capital expenditures for full year 2025 were $18.9 million focused on new store openings and the OMS project. With respect to store count, we opened 7 stores in the fourth quarter with no closures. We ended the year with 256 stores, a net increase of 4 for the year as 9 new store openings were offset by 5 closures.

Turning to our expectations for fiscal 2026. As mentioned, we expect 2026 will be a year of deliberate investment. Our guidance reflects this along with the continued uncertainty in the consumer and geopolitical environment, the turbulent trade policy landscape and the expectation that it will take some time for new customers to respond to our evolving product assortments.

As Mary Ellen mentioned, and as is reflected in our first quarter guidance, we have seen a softer start to Q1. We expect this performance to gradually improve in second quarter as the new assortments hit in their entirety for the first time before gaining incremental momentum as we move into the second half of 2026. Further, our guidance assumes tariffs incurred and paid for products landed before February 28, 2026, will expense through the P&L during the first half of 2026.

As a reminder, these tariffs were an average rate of approximately 20% and net of vendor offsets are expected to result in about $5 million of added cost of goods sold in the first quarter compared to 0 tariffs incurred in Q1 2025. Going forward, we are now assuming 10% tariffs on goods received after February 28 through the end of the first quarter and 15% on goods received for the rest of the year. Given these rates, we expect the second quarter to incur approximately $4 million of incremental net tariff costs compared to less than $1 million incurred last year in Q2 and Q3 and Q4 to incur approximately $3 million of net tariff costs each compared to $2.5 million and $4.5 million in Q3 and Q4 last year, respectively.

Total tariff load net of vendor offsets in 2026 will be about $15 million compared to about $7.5 million incurred in 2025. Our assumptions related to tariff rates are all subject to any additional changes the U.S. may enact to global trade policies.

Further, our guidance does not assume receipt of any refunds of tariffs paid to date. For the first quarter of fiscal 2026, we expect sales to be down approximately 5% to 7% compared to last year, with total company comp sales down approximately 7% to 9%. We expect adjusted EBITDA to be in the range of $15 million to $17 million, reflecting approximately $5 million of tariff pressure.

For Q1, we expect gross margin to be down about 400 basis points compared to Q1 2025 as the annualized impacts of tariffs is incurred and product and marketing strategies are still evolving. While the quarter is off to a challenging start, as discussed, we are seeing relatively better performance quarter-to-date in our retail channel.

For full year fiscal 2026, we expect sales to be down 2% to about flat compared to last year. Total company comp sales to be in the range of down 3% to down 1% and adjusted EBITDA of $70 million to $75 million. This guidance assumes full year gross margins down about 50 basis points compared to 2025 as we expect headwinds related to tariffs in the first half to be partially offset by better full-price selling, lower promotions and lower year-over-year tariffs beginning in Q4.

Regarding inventory, we will continue to take a prudent approach to inventory investments given the relative uncertainty we have discussed with unit purchases positioned down in the mid-single digits.

Regarding store count, we continue to see opportunity to expand, but remain disciplined in our approach amidst our brand evolution. We are pleased with the performance of new stores opened to date and expect to grow net store count by about 5 stores by the end of fiscal 2026. Of our planned openings, approximately half are in reentry markets.

We expect reentry stores to ramp very quickly given the customer reception and brand awareness that exists in these markets, while new markets are experiencing a longer ramp period. We expect openings in new markets to experience about a 3- to 5-year ramp to maturity. New stores represent an attractive investment opportunity and we are excited to continue to expand our footprint at a disciplined pace.

With respect to total capital expenditures, we expect to spend about $25 million in fiscal 2026 with investments focused on new stores and a new merch planning and allocation system that is projected to be completed toward the end of 2026. Regarding free cash flow, we expect free cash flow for fiscal 2026 of about $20 million.

And finally, with respect to cash distributions, we announced today that our Board of Directors approved a $0.09 dividend, reflecting a $0.01 or 12.5% increase in our ordinary dividend payable April 28 to shareholders of record as of April 14, and we have $14 million remaining on our share repurchase program, which is authorized through December 2026. It is important to note that given the timing of year-end and Q4 earnings announcements, our Q1 repurchase window tends to be shorter than other windows during the year.

In summary, we believe we are making the adjustments necessary to position the business for sustainable growth. We are confident the modernization and evolution of our product and marketing efforts will enhance and broaden the appeal and awareness of our incredible brand. And we believe the investments we are making in our front-end MP&A platforms will position us well and provide benefits into fiscal 2027 and beyond, all while continuing with our commitment to distribute excess cash to shareholders through our ordinary dividend program and share repurchases.

Thank you. I will now hand it back to the operator for questions.

[Operator Instructions]. Your first question comes from the line of Jonna Kim of TD Cowen.

Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? Would love any color there?

And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day.

Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1, which had a challenging start, was amidst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers.

But we do believe that the macro environment had an impact in this quarter for sure.

With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by a product drop that is coming in the 10 days before.

Your next question comes from the line of Dana Telsey of Telsey Group.

A lot of work underway. As you think about the product assortment and the test-and-learn that you've put in place, what is changing, bottoms, tops, sweaters, style, look, prints, patterns, what is changing? And what do you expect to see and when will the new full assortment be there?

And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward?

And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs?

Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe.

We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years, accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life.

We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have. We are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, we love this customer segment. She's loyal. She's responsive. She has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience.

Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience.

Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. What we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera.

What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates, maybe up a tiny bit that we would have factored in. I mentioned in Q4 was the first quarter in a while where we actually had freight -- small freight savings.

And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward.

Yes. And I just want to circle back for one minute, Dana and just reiterate, while we know we have a great customer, we also know the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward.

Your next question comes from the line of Corey Tarlowe of Jefferies.

Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date?

Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter. It was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November.I think we messaged some of that in some of our intra-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter.

And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter.

Understood. And I think you mentioned a new merchandise planning system. I know that there have been other initiatives that you've undertaken, whether it was the OMS project or other items. Can you talk a little bit about the benefits of this, what the costs are and then how we should think about other incremental projects that are coming in, in this year, which I think you called an investment year?

I mean, Corey, I'll start just by saying we are so excited about the MP&A project through Anaplan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right depth at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative.

Yes. And Corey, the OMS, one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned.

With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted project than an OMS project would be. An OMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct business, et cetera. So that's kind of what's behind the expectation of it being an investment here with respect to capital.

And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward and then obviously, payroll and some of the investments we've made in talent.

Your next question comes from the line of Dylan Carden of William Blair.

This is Anna Linscott on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement?

So I'll start -- thank you for the question. Listen, as we're entering 2026, we are in a period of evolution, and we are testing and learning every day. What I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4. We will see learnings from our marketing initiatives that we're testing, where we are rebalancing spend, where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't.

I was just going to add with respect to the Q4, as Mary Ellen mentioned, the product, obviously, it's -- we're still pre the new assortments in Q1. And we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts that Q4 would then turn to a small tailwind.

So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well.

Understood. And then on pricing, do you guys see additional opportunity for targeted price increases in 2026? Is this reflected in the current guide? Or does the current consumer environment warrant a more cautious approach?

We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price.

And your next question comes from the line of Janine Stichter of BTIG.

You've got Ethan Saghi on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date?

Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule. We saw success in expanded categories in outerwear. We saw the start of accessories, which has really moved into Q1 as a success story and we tested some price points, particularly in sweaters with cashmere and saw success.

As we moved into Q1, we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our true product evolution. Where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there.

With no further questions, that concludes our Q&A session and also concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you for standing by. My name is Jill, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Third Quarter 2025 Earnings Call. [Operator Instructions] Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made in this recording are as of December 10, 2025, and J.Jill does not undertake any obligation to update these forward-looking statements.

Finally, J.Jill may refer to certain adjusted or non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued December 10, 2025. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, CEO. You may begin.

Good morning, everyone, and thank you for joining us today. As seen in our press release this morning, we had a solid third quarter. We delivered better-than-expected earnings results with top line at the high end of our expectations for the period and drove healthy cash generation, a hallmark of our operating model. During the third quarter, we saw positive response to newness in the assortment, particularly in jackets and bottoms, including our fashion denim, faux suede and full leather outerwear.

We also took opportunities to test and rebalance our marketing mix, pulling back on catalog circulation while leaning into digital channels where we know customers are increasingly transacting. Within digital, we saw success, especially in prospecting where growth in new-to-brand customers delivered a healthy return. We also refreshed our imagery in store windows, digital and catalog, leading to positive responses with customers noticing the more compelling displays and presentations.

From a retail expansion perspective, we opened 2 new stores in Q3, one in Chicago, a reentry market and one in Houston, an existing and growing market for us and are pleased with the early results they are driving. As we exited October and entered November, however, we saw a change in trend. The competitive market became very promotional very early. The customer demonstrated increasing price sensitivity and our holiday product assortments did not resonate as well as we had planned.

Importantly, we are not standing still. Our entire team is collaborating, bringing fresh perspectives and new ideas as we focus on reinvigorating the customer file and driving growth. As we talked about previously, our goal for the second half of this year was to test and learn and inform our plans for 2026 when we will have the ability to more fully influence the product assortment.

We remain focused on our 3 strategic priorities. First, evolving our product assortment. Our merchandising and design teams are now in place and working together to eliminate redundancy, incorporate new styles that serve more of our customers' lifestyle needs and focus on areas where we see opportunities for scale. We recently introduced very small capsules in sleep, travel sets and cashmere that we were able to chase into for the holiday season and are seeing strong full price results despite the promotional trends I mentioned earlier.

We have also begun testing a more localized merchandising and planning strategy with promising early results from our New York store pilot, where we tailored the assortment to local customer preferences. Second, enhancing the customer journey. We will continue to rightsize our catalog circulation while reinvesting spends across channels and marketing funnels. Building on our small localized television advertising pilot last quarter, we are now testing a small national linear and streaming broadcast pilot as we continue to assess and learn how best to expand our reach.

Our stores continue to serve as powerful marketing vehicles, driving brand awareness while maintaining strong economics and profitability. We are excited for the new stores that will open before the end of the fiscal year, including our most recent opening in Pinehurst, North Carolina in November and our anticipated reopening in Asheville this month. We look forward to continuing to capitalize on the long-term opportunities for store growth ahead.

Lastly, we are enhancing the customer experience with plans to launch a non-tender loyalty program toward the end of this fiscal year. Third, improving how we work. We recently took decisive cost actions to streamline our organization and improve operational efficiencies. These changes, while difficult, position us to operate more nimbly while investing in growth initiatives. We also created a new chief growth officer role, welcoming experienced consumer executive, Viv Rettke, to our team to lead our e-commerce business, advance our AI initiatives and drive our longer-term strategic road map.

In summary, while we are focused on managing through the remainder of the year, the progress we are making on our initiatives today is building the foundation for our next chapter of growth focused on expanding our customer file. We are modernizing our brand presentation, maintaining the loyalty of our core demographic as we welcome new customers and leveraging technology to work smarter and faster. The foundation is solid, the opportunity is clear and the execution is underway. Now I'll turn it over to Mark for detailed financial results.

Thank you, Mary Ellen, and good morning, everyone. Before I dive into our results and outlook, I want to reiterate Mary Ellen's confidence in the foundation of the business and the progress we are making toward the opportunities ahead. Over the past several years, we have developed and executed a disciplined operating model that generates dependable, strong cash flow that we have been investing into the business and distributing to shareholders through our ordinary dividend and share buyback programs. While we are focused on executing the fourth quarter and end of year 2025, we are also sharpening and evolving our product and marketing efforts to position the business for 2026 and beyond.

Now I'll review results for the third quarter in detail. Total company comparable sales for third quarter decreased 0.9% compared to negative 0.8% last year. Total company sales for the quarter were about $151 million, in line with the higher end of our expectations, down 0.5% versus Q3 2024. Total company sales performance was driven by our direct channel as direct sales were up 2% compared to the prior year, while store sales were down 2.6% compared to prior year.

The difference in channel performance was largely driven by traffic trends as our direct channel saw positive traffic and some benefit from ship from store, while store traffic was soft in the quarter. In both channels, we saw lower conversion trends. However, our teams did a nice job managing promotions and markdowns to yield higher average unit retails. Q3 total company gross profit was about $107 million, down about $1 million compared to Q3 2024.

Q3 gross margin was 70.9%, down 50 basis points versus Q3 2024 and included approximately $2.5 million of net tariff pressure in the quarter. This tariff pressure was less than originally expected due to timing and mix of sales and was partially offset by positive average unit retails compared to last year. SG&A expenses for the quarter were about $92 million compared to approximately $89 million last year. The increase was driven by nonrecurring costs and shipping expenses associated with ship from store.

Importantly, at the end of the quarter, we took decisive actions to rightsize our organization and better prepare our teams to support future growth more efficiently. These actions will positively impact SG&A in the fourth quarter and into 2026, helping to offset expense pressure from new store growth and inflation. Adjusted EBITDA was $24.3 million in the quarter compared to $26.8 million in Q3 2024.

Interest expense was $2.7 million in Q3 compared to $2.8 million last year. Adjusted net income per diluted share was $0.76 compared to $0.89 last year, which reflected an average weighted diluted share count of 15.4 million shares this year versus 15.5 million shares last year. We repurchased 115,612 shares for approximately $2 million in the third quarter, bringing year-to-date repurchases to about 371,000 shares for $6.5 million, resulting in approximately $0.02 benefit to reported third quarter adjusted diluted EPS.

As of November 1, we have approximately $18 million remaining on the $25 million share repurchase authorization. We also paid our quarterly dividend of $0.08 per share on October 1. And as announced on December 3, our Board approved payment of the Q4 dividend on January 7 to shareholders of record as of December 24. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures.

Turning to cash flow. For the quarter, we generated about $19 million of cash from operations, resulting in ending cash of about $58 million. End of quarter inventory was up 8.4% compared to end of Q3 last year. Excluding approximately $6 million of net tariff costs, inventory was down 1% compared to end of quarter last year. Capital expenditures for the quarter were $3.3 million compared to $5.5 million last year, with investments focused primarily on store-related projects.

With respect to store count, we ended the quarter with 249 stores compared to 247 stores at end of third quarter last year. We opened 2 new stores at the end of the third quarter. The first, a new store in the existing Houston, Texas market in Kingwood and the second, a reentry in Orland, Illinois in the Chicago market.

Turning now to our outlook for fourth quarter and full year. As Mary Ellen mentioned, there is tremendous opportunity to evolve our product and marketing to broaden the appeal of the assortments, drive awareness and ultimately drive growth and have already been making small tweaks with encouraging results. The full impact of this opportunity will be felt more meaningfully next year.

With respect to Q4, the competitive promotional environment elevated with many going early and deep with Black Friday deals. While our Black Friday, Cyber Monday weekend showed some strength, overall November was challenging, and we believe the elevated promotional environment will continue through the quarter, which is assumed in our guidance. For the fourth quarter, we expect sales to be down approximately 5% to 7% and total comparable sales to be down 6.5% to 8.5%.

And regarding adjusted EBITDA, we expect Q4 adjusted EBITDA to be in the range of $3 million and $5 million, reflecting significantly more gross margin pressure than experienced in Q3 given the elevated promotional environment and the expectation that the full impact of approximately $5 million of net tariffs will hit cost of goods sold in Q4. These pressures will be partially offset by slightly better year-over-year freight costs.

In addition, while we expect SG&A dollars to be relatively flat compared to the fourth quarter last year, we expect it to deleverage given lower sales. Our year-to-date performance and expectations for the fourth quarter would imply that for the full year, we expect sales to be down about 3% and comparable sales to be down about 4% compared to fiscal 2024 and for full year adjusted EBITDA to be between $80 million and $82 million.

Regarding store count, we expect to open 7 new stores in the fourth quarter, including one opened in November in Pinehurst, North Carolina, a new market for us. We do not expect to close any additional stores this year, resulting in 4 net new stores for fiscal year 2025. And with respect to total capital expenditures, we expect to spend about $20 million in reported CapEx during fiscal 2025.

In closing, we are focused on continuing to operate the business with discipline, which, as demonstrated in the third quarter, generates strong free cash flow and supports the investments we are making into the business and our commitment to distributing excess cash to shareholders as evidenced by our continuing dividend and share repurchase programs.

We are energized by the work we have underway and confident that the strategies we are developing are setting the foundation to further support long-term profitable growth. Thank you. I'll now hand it back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Jonna Kim of TD Cowen.

Just curious on how you're thinking about next year as you think about merchandising and also marketing, how you're prioritizing some of your initiatives there? And then just how would you characterize the softness that you saw in fourth quarter? Is that more macro driven in your view? I know you also mentioned the holiday products may resonate, but what changes you could have made potentially to have better resonance with consumers there would love additional color?

Good morning Jonna and thanks for the question. As we had mentioned earlier, entering Q2, we knew that we could not influence much with respect to the product. So we are very pleased at how the team navigated and delivered Q3. That being said, towards the end of the quarter and moving into Q4, we have seen a soft start, particularly in response to the assortment. But there's very heavy promotion out there, which started much earlier and deeper than usual, and the customer is demonstrating increased price sensitivity.

So I think that in conjunction with a softer assortment led to the results that we're seeing today. What we're very encouraged by as we think about 2026 are the learnings that we've had coming out of this quarter. And to your question, we -- about product and marketing, we will be able to influence product assortments as we get toward the end of Q1, and those will be continuing to evolve as we go through the year. We've also done some marketing tests, as we mentioned in the script about really evaluating cert, evaluating digital, rebalancing and seeing some of those successes, we believe we're poised to make adjustments to our marketing mix next year that will really resonate, bringing in new-to-brand customers, but also maintaining our loyal customer base, which is so critical for us and increasing retention and spend on that front.

And Jonna, I would just add on to Mary Ellen's comments regarding Q3 into Q4 that Q4 is really never our favorite quarter here. It's different than many other retailers in that our holiday is not -- it's not our biggest quarter. It's always promotional, and it's the least sort of aligned with our full price model just given that level of promotion.

The sort of macro versus our own product, I think it's both to the points that Mary Ellen just made and really coming into November where a quarter that is heavily front-loaded right up until the holidays and Christmas and then becomes very sale focused in smaller weeks for the rest of the quarter sort of leads us to the guidance to really put out there our expectation that it appears that with those macro factors in November, with the fact that the competitive environment is very promotional, we expect that, that promotional level will continue, and we will do what's necessary to manage through this Q4, like we kind of always do, but manage through this Q4 to then enter Q1 of 2026 clean and really sort of start to see what we're all excited about, what Mary Ellen just talked about with respect to the product and the marketing adjustments that we're making along the way.

Your next question comes from the line of Corey Tarlowe from Jefferies.

Mary Ellen, I was just wondering if you could talk about from a high level, what worked well in the third quarter and maybe quarter-to-date as well, where you've seen some green shoots from a product perspective, that would just be good to get an understanding of?

Sure. Thanks, Corey. Yes, in Q3, we saw particular strength in product categories, bottoms and jackets and outerwear. And we are encouraged as we've seen jackets and outerwear continue to perform in Q4. What we're most encouraged about are some of the categories where we've done some testing. We've seen newness work in Q3 which is very exciting, again, particularly when we sort of leather -- full leather, faux suede and the percent of newness really outpacing -- sales outpacing inventory was very encouraging.

As we look forward, some of the tests that we've done where we mentioned where we've put cashmere back into the business in a very small way as the test has one, where we've leaned into sleep has one. So we're excited about those things as we move forward.

That's really helpful. And then just for Mark, it sounds like you've really kind of taken cost out of the business. Mary Ellen, I think you mentioned that you also made a new hire in AI and technology. So I'm curious about how you -- the role of technology or how you see the role of technology evolving the business going forward and where you see opportunities for leverage and further efficiencies?

Yes, Corey, let me start and Mary Ellen can fill in on some of the exciting news around the new appointment. What I would say is a lot of the heavy lifting on systems that we've done to date, which are large foundational systems help prepare the tech stack to be ready to take advantage of the new technology, AI, et cetera, just by getting cleaner data, getting cleaner and easier and easier is maybe not the word, but more modern interfaces and integration layers with our systems.

So we get excited about the capabilities that, that presents for us as we go forward and definitely do view having that sort of foundation laid the opportunity to now continue to push into more front-end business type systems enabled with the newest technologies that we can start to test and get efficiencies from as we go forward.

Yes. And I'll just jump in and say we're very excited to have Viv join the team and lead our AI -- our technology initiatives, specifically focused on AI. As you know, as Mark just mentioned, there are -- there's so much out there that we can really incorporate into our business process that will just make us more operationally efficient. It will allow us to move faster. It will allow us to test and learn. So we're very excited about the road map that we are building with Viv that incorporates both larger scale projects and then small platforms that we can plug in to see some quick wins. And it's for us, it's very important to have someone here day-to-day really leading that champion that effort as we're all working on so many different things.

All right. Thank so much and best of luck.

Your next question comes from the line of Marni Shapiro of The Retail Tracker.

Congrats on the quarter, and I know it's tough out there, but I have to say, I think your stores have looked very good. And cleaner, I guess, is the best way, easier to shop. I don't know, they look a little bit more modern. So kudos for that, because I think it does look different in there.

Can you talk a little bit, because now I'm wondering have I've been in some of the stores in the localized strategy. Can you talk a little bit about the test you ran on the localized strategy, kind of what you did, what that is about and then how that also impacts your marketing? Because I think you talked about some localized strategy even within marketing and streaming and things like that?

Sure. Thanks, Marni. Our -- the test that we did in the New York stores, it's interesting. We very -- we went in very strategically and thought about the customer and the end use and have really made the assortment more relevant for her lifestyle. So it starts with the products we put in there. Obviously, New York, we're going to do more black, a little bit more put together. We've taken some of the print mix out and then really set the store up in a way that we find it very easy for her to -- it's compelling and it's easy for her to shop and shop for outfits.

We've changed the window graphics and the mannequins, and we've gotten street traffic based on that. So very encouraging. And with the caveat that this is a test of one store. What we truly believe, though, is that we can have categories of stores that are -- we're doing allocations by climate, by end use. And so we think that there's a lot more to come in '26 as we dive into this.

Important too, though, local strategies around marketing. So the first one was our broadcast television pilot, which was in three markets where we saw a lift, obviously, engagement, but a lift in new-to-brand customers and traffic overall to the site and to the stores. But again, a test of 3 markets. So we've rolled out a broader test, which we will be evaluating shortly, and I'm encouraged by that.

We also, in our Chicago market, where we opened a store in Orland Park and went in and did a heavy up where we really leaned into digital social advertising in those markets and saw a really strong return in Q3 as we did that. So again, all of these tests important as we move into 2026 and really think through how we have a greater impact with these efforts, both on the product and the marketing side.

That's great. And can I also do one quick follow-up just on some of the product. You said you had put cashmere in there. You mentioned that some of what I would call the novelty denim sold out. I've noticed certain things that have sold out in your stores just sold down very quickly. It seems to be the items that are new, novel, they're not just wardrobe updates, they're kind of something fresh and new. Is your customer passing right now on just -- an update and looking for what's new? And are you able to shift the assortment for the first half of '26? Or is it too late? Like how are you thinking about all of that?

Yes. So what I would say is what we saw particularly as we had ended Q3 and headed into Q4 is we did not have enough newness that the customer really is looking for that. At this moment in time, with the environment the way it is incredibly promotional, with consumer sentiment where it is, she's being very choiceful. So what we're very encouraged by is when we have something new in front of her that she's excited by, she will respond. So as we head into the back half of Q1 and the balance of 2026, that is absolutely the way that we are moving forward, ensuring that we have enough newness for her, protecting the core items that she's always loved from us, but really making sure we have enough newness on the floor to keep her engaged.

Your next question comes from the line of Janine Stichter of BTIG.

Mary Ellen, you mentioned pricing sensitivity with the consumer. I think you took some price increases, small in August and I think a little bit more in September. I'm curious what you learned when you took those price increases and how that impacts your thoughts on how much you can offset the $5 million tariff headwind?

Sure. Janine, we took very strategic and measured price increases in Q3, right? So rather than taking prices up across the board, we went in where we really thought the customer would respond and would not have an issue with it. What we saw was an overall AUR increase in Q3. So we're pleased that she has responded well, and she is going with us with those increases. And it was, as we mentioned earlier, it was a single-digit percent that we took prices up. So far, we're pleased with the response.

Okay. Great. And then maybe just as we think about kind of the right level of promotion for the business, and I know Q4 is a particularly weird time, but how do you think about what the right level of promotion is? And also, I'm curious about how you're planning inventory for next year. It sounds like the goal is to end the year fully clean and be off to a fresh start in Q1. But how do you think about the first half purchases just given the volatility out there?

Janine, it's Mark. I'll answer the inventory question first. We're going to plan inventory as conservative just knowing that we are sort -- with the we're evolving the product assortments and that we are exiting this sort of unknown end date of when the consumer sentiment stabilizes and hopefully starts to increase at some point. So we'll be relatively conservative on the inventory buys going into the year.

Yes. And Janine, I would say on the promotional front, Q4 is always the most promotional quarter. What we've seen is that our direct peer set started much earlier and much deeper starting back at the beginning of October. So we're seeing elevated promotions this year across the board. And we will do -- we will manage our promotions to get out of the fourth quarter clean, as we look to 2026, we're obviously looking to be very measured in how and when we promote. And obviously, response to product is key there. When we see her response to good product, we know we don't need to be promotional.

Your next question comes from the line of Dylan Carden of William Blair.

This is Marcus Belanger. I'm on for Dylan. I'm just curious, can you talk a little bit about your pricing strategy going into 2026? Are you planning to be as conservative as you've been thus far? And can you talk a little bit about what you're seeing from your consumer? I know they're sort of at the higher income demo. So that's been the one that's been reported to be driving the economy. So can you provide a little color on that disconnect and just your overall read on the higher income shopper?

Marcus, it's Mark. I'll take the first part on pricing, and then Mary Ellen can jump in on the second part. I would say that as Mary Ellen just answered in the previous question, we'll continue to be very strategic with respect to pricing. And that means not going and spreading peanut butter price increases across the assortment.

It means looking strategically with the merchant teams and identifying pockets of opportunity relative to the competitive sets and relative to what we feel is a great -- still a great value for money that you get. So that sort of approach that we've already launched with, which Mary Ellen said is in the low single digits, that approach continues.

Yes. And what I would add to that, Marcus, is we -- as we look forward and as assortments evolve, our pricing strategy will be reflected in the assortment. So as we rebalance, we'll do the appropriate -- take the appropriate actions as we move forward. As Mark said, we're going to be very strategic. We're going to be very targeted as to where we believe the consumer will pay the price. This is a brand that has always been known for value and for quality, and we will protect those.

That being said, several of the styles that we have tested end of Q3 and into Q4 that are at higher tickets have worked in small tests, small product categories, but they've worked. So we're encouraged as we move forward, but we'll be very diligent about where we believe the price is worth the value.

I guess on gross margin, if you add back the 2.5% tariff better-than-expected performance, you kind of get to what you previously guided to. Were there any other things embedded in the third quarter performance that surprised you?

Marcus, what I would say is the offset to the tariff pressure of the $2.5 million, which is straight math, is largely the AUR benefit that we were able to see. And I would just build on what Mary Ellen just said that pricing -- strategic pricing increases can work all the way through the yield curve. And in Q3, we did see a lot of that benefit come through in the markdown part of the yield curve with opportunity as we go forward with all the assortment and marketing evolutions we're putting in is to drive more at full price and yield the full price as well.

So -- but in the quarter in Q3, the offset was largely the AUR that we realized in the quarter that helped offset that $2.5 million worth of tariff partially. And then there was a little bit of freight upside in the quarter as well. But the lion's share was the AUR performance.

With no further questions, I would like to turn the conference back over to management for closing remarks.

Thank you all for joining us today. We look forward to speaking with you again on the fourth quarter call, and we hope that everyone has a happy and healthy holiday seasons.

This concludes today's conference call. You may now disconnect.

Thank you for standing by, and welcome to the J.Jill Second Quarter 2025 Earnings Conference Call.

Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of September 3, 2025, and J.Jill does not undertake any obligation to update these forward-looking statements.

Finally, J.Jill may refer to certain adjusted or non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued September 3, 2025. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com.

I'd now like to turn the call over to Mary Ellen Coyne, Chief Executive Officer and President at J.Jill. You may begin.

Good morning, everyone, and thank you for joining us today. With my first full quarter as CEO of J.Jill completed, I want to begin by thanking our team for their dedication and support. Since joining in May, I've had the opportunity to dive deeper into all aspects of our business, and I remain confident in the significant opportunities ahead despite navigating some near-term challenges.

In the second quarter, sales trends sequentially improved month-over-month, enabling us to deliver total sales down less than 1% and adjusted EBITDA of $25.6 million. Improved traffic, both online and in stores, supported this performance as well as increased promotional activity, which we leverage to better align inventory to sales trends as we entered the back half of the year. I am energized by what I see having had 100 days to assess this business. We serve a growing and valuable demographic. We have a deep understanding of this customer segment and have, therefore, developed a loyal customer base. We operate with discipline, which has allowed us to consistently deliver high margins and generate significant free cash flow. We will continue to lean into these strengths and position the brand to drive long-term profitable growth.

To do this, we must expand our customer file, attracting a significant number of new customers, reengaging those who have shopped with us before and continuing to delight our existing loyal customer base. In the near term, we plan to move quickly but thoughtfully, testing new initiatives and leaning into those that work to deliver on our objectives and widening the aperture of our focus to appeal to a broader audience. Concentrating on driving customer growth, we will execute immediately on 3 areas: one, evolving our product assortment; two, enhancing the customer journey; and three, improving the way we work.

With respect to product, we need to widen the appeal of our assortment to attract new customers while continuing to deliver newness that is relevant and versatile to fit her lifestyle. Our new Chief Merchandising Officer, Courtney O'Connor, has been partnering closely with Creative Director, Elliot Staples and the design merchandising and planning teams to develop a compelling assortment for spring 2026 while making subtle refinements in the product assortments and presentations for fall and winter this year. We are going to focus on delivering a stronger, more cohesive product assortment moving forward, eliminating redundancy to incorporate new styles that serve more of the customers' lifestyle needs to capture a greater share of her wardrobe. As we make these enhancements, we will also be leaning into expansion opportunities in areas such as accessories, building on what is currently a small but highly scalable business.

Moving to our second area of focus, enhancing the customer journey. We are evaluating ways to expand our reach to capture the full marketing funnel, top, middle and bottom. We just recently completed a small test with television advertising. And for the back half of this year, we made adjustments to the marketing mix, enabling greater flexibility to engage a wider audience. In addition, as we evaluate the right balance across our marketing channels, we have reshopped certain imagery for the second half of the year that you will begin to see across digital media, catalogs, in stores and online soon. We run highly profitable stores, which also serve as a great marketing vehicle for the brand. They allow us to tell our product story to both new and existing customers, and we are excited for our upcoming store openings later this fall. We are confident in our long-term goal to open 50 stores by the end of 2029.

As we execute on this objective, we are constantly evaluating opportunities for store locations focused on driving productivity, welcoming new customers and increasing brand awareness. We know the opportunity that is in front of us, and it is one that our whole organization is rallying around. To support this, we are focused on improving the way we work, leaning into technology capabilities that will enable us to work smarter, faster and more effectively. This includes building a strategic technology road map, incorporating opportunities for AI implementation in order to accelerate growth, gain efficiencies and improve the customer experience.

We're fostering a corporate culture that isn't just about process improvements, but about the agility and urgency needed to capitalize on the opportunities ahead of us. The teams did a great job in executing the implementation of OMS, and we are pleased to share that we launched the new ship-from-store capabilities well ahead of plan and in time for the fall and winter season launches. As we continue to evolve the brand and progress forward, we are in the office, collaborating with one another. There's a palpable energy across the organization.

In summary, I believe through the actions and strategies we are putting in place, we are addressing the right priorities, enabling us to build on the strength of our proven operating model while capitalizing on the areas that will drive sustainable, profitable growth. With that said, we are continuing to operate in a very dynamic and uncertain environment, particularly as it relates to inflation and tariffs. In response, our team is leveraging our strong relationships with vendor partners and staying nimble and responsive as we navigate the evolving macro landscape. As we look toward 2026 and beyond, we are excited to write the next chapter, building a stronger, more agile business to deliver enhanced shareholder value. I look forward to updating you on our progress.

Now I'll turn it over to Mark for a detailed review of our financial performance.

Thank you, Mary Ellen, and good morning, everyone.

Following a challenging start to the second quarter, we were encouraged that sales trends stabilized and improved into June and July. We remained committed to our disciplines during the quarter, assessing slow-moving inventory units and taking action when necessary, resulting in improved end-of-quarter inventory levels compared to the end of Q1. And we rolled out ship from store, our first omnichannel capability post OMS go-live, extending it to the entire fleet during the month of July. Our operating model continues to demonstrate its strength and resilience, generating $17 million of free cash flow in the quarter, resulting in end of quarter cash on the balance sheet of $46 million.

Now let me provide more details on our second quarter results. Total company sales for the quarter were about $154 million, down 0.8% compared to Q2 2024. Total company comparable sales for the quarter were down 1%. Store sales for Q2 were up 0.4% compared to Q2 2024, driven by 3 net new stores in the quarter compared to last year. And direct sales, which represented about 46% of total sales in the quarter were down about 2% compared to second quarter of fiscal 2024. As mentioned, sales trends improved each month of the second quarter. This was in part due to positive customer response to the summer sale in July, which helped clear markdown goods and end the quarter with clean inventories.

Q2 total company gross profit was about $105 million, down about $4 million compared to Q2 2024. Q2 gross margin was 68.4%, down about 210 basis points versus Q2 2024, driven primarily by a higher mix of markdown sales and higher full price promotional rates as we took action and successfully moved the liable inventory we carried into the quarter. Gross margin rate was also pressured by approximately 50 basis points related to tariffs.

SG&A expenses for the quarter were about $89 million compared to approximately $86 million last year. The increase was driven by higher store expenses, driven by net new stores and higher occupancy costs on lease renewals, higher shipping expenses, nonrecurring costs and higher marketing expenses, partially offset by lower management incentive accruals and OMS-related costs, which were slightly below last year at about $300,000 for the quarter.

Adjusted EBITDA was $25.6 million in the quarter compared to $30.2 million in Q2 2024. Interest expense was $2.7 million in Q2 compared to $3.7 million last year. Adjusted net income per diluted share was $0.81 compared to $1.05 last year, which reflected an average weighted diluted share count of 15.3 million shares this year versus 15.1 million shares last year. We repurchased 68,000 shares for approximately $1 million in the second quarter, bringing year-to-date repurchases to 255,000 shares for $4.5 million and resulting in approximately $0.01 benefit to reported second quarter adjusted diluted EPS. As of September 3, we have approximately $20 million remaining on the $25 million share repurchase authorization. We also paid our quarterly dividend of $0.08 per share on July 9. And as announced on August 27, our Board approved payment of the Q3 dividend on October 1 to shareholders of record as of September 17. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures.

Turning to cash flow. For the quarter, we generated about $19 million of cash from operations, resulting in ending cash of about $46 million. Looking at inventory, we successfully cleared excess inventory units during the quarter, ending second quarter with inventories about flat to last year, excluding the incremental costs associated with tariffs. Including the cost of tariffs in both on hand and in-transit inventory, total reported inventory is up about 5% compared to end of second quarter last year.

Capital expenditures for the quarter were about $3 million compared to $2 million last year. Investments were focused primarily on stores and the project to launch ship-from-store capabilities, which rolled out during the quarter and are now active in all stores across the fleet. We are excited to have this omni capability enabled. It will help drive sales growth and support gross margins as previously unfulfillable demand is fulfilled. With respect to store count, we closed 2 stores during the second quarter. We did not open any new stores in the quarter, resulting in end-of-quarter store count of 247 stores compared to 244 stores at the end of Q2 last year.

Now turning to our outlook. Under the current global trade agreements, we now have more visibility to the impact of tariffs on our cost of goods sold and are working levers to mitigate the impact as much as possible. While there remains some uncertainty with how all of these actions by us and others across the industry will impact the U.S. consumer, we are providing certain guidance metrics for the third quarter of fiscal 2025 as detailed today in our press release. For third quarter, we expect adjusted EBITDA to be in the range of $18 million to $22 million. This range assumes sales will be about flat to down low single digits for the quarter, and comps will be down in the low to mid-single digits. Gross margins are assumed to be down compared to last year, more than experienced in Q2, driven primarily by tariff pressure.

With respect to tariffs, rates for our largest sourcing countries have landed on average around 20% with India now at 50%. This compares to our prior assumption of 10% on all countries and 30% on China. Given these elevated rates, our guidance for the third quarter assumes approximately $5 million of incremental impact from tariffs net of vendor negotiated offsets. We would assume a similar level going forward on a quarterly basis should current tariff policies remain in place. As Mary Ellen mentioned, we are working multiple levers to mitigate the impact as much as possible, including negotiating savings offsets with our vendors, adjusting on order quantities and strategically reviewing promotion and pricing strategies to drive higher average unit retails.

With respect to capital expenditures for the year, we continue to expect spend of between $20 million and $25 million. And regarding store count, we still expect to open between 1 and 5 net new stores this year, with 2 new stores planned to open toward the end of the third quarter. As demonstrated year-to-date, the business continues to generate strong free cash flow, and we remain committed to our strategy to support total shareholder returns, which includes paying our dividend, repurchasing shares and paying down debt.

As previously mentioned, we announced our quarterly dividend of $0.08 per share payable on October 1 to shareholders of record on September 17. We have repurchased approximately 255,000 shares year-to-date, including a repurchase of 68,000 shares in Q2 for about $1 million. We will continue to opportunistically repurchase shares under the remaining $20 million of our $25 million authorization. And with funded debt currently sitting at $70 million on the balance sheet with plenty of term remaining, we have ample flexibility, and we'll continue to opportunistically evaluate refinancing options.

Importantly, as Mary Ellen mentioned in her remarks, we are encouraged by the opportunities in front of us. We will continue to operate the business with discipline and are committed to making strategic investments this year to sharpen our brand voice through evolved and focused product assortments and refined marketing approach to build our customer file and drive profitable growth.

Thank you. I will now hand it back to the operator for questions.

[Operator Instructions] Your first question today comes from the line of Jonna Kim from TD Cowen.

Just would love additional color around what drove the improvement in June and July? And Mark, on tariffs, how should we think about sort of the annualized tariff impact next year as you mitigate some of the impact that you have this year? Would love additional color there?

Great. Thanks, Jonna. I'll jump in and Mary Ellen can provide some color as needed. The performance in Q2 was really driven by clearance activities coming out of the sort of slowdown we saw at the end of Q1, beginning of Q2 and then really committing to our discipline to drive markdowns and promos as necessary, and we saw good customer response to that, really good response to the sale in July. So that was kind of what was behind the trends that we saw in Q2. Underneath that, traffic improved a little bit, conversion improved a little bit, which is not uncommon with elevated levels of promotion and markdown at the end of Q2.

Tariffs, what we've indicated, Jonna, is that tariffs really net of vendor negotiated offsets of about $5 million in Q3. We expect will roll forward for the most part in the quarters to come. So I think there's -- without giving the specific answer, there's the annualized portion of the $5 million annualizing closer to $20 million. That's probably the best math at this point. And then, of course, we're working other levers around the -- on order adjustments as well as strategic pricing and promotions that over time may mitigate the absolute dollar amount of that tariff hit on a quarterly basis.

And then just one question. In the second half, do you expect promotional levels to be in line or elevated versus last year? Any thoughts there would be helpful.

Yes, it's a good question. I mean the landscape from here forward somewhat changes from the landscape through the first half because now we're in sort of the tariff part of the year. And our expectation is, as we mentioned previously, our unit receipts in the back half are bought down closer to the mid-single digits. So the sort of supply side is adjusted. The expectation would be that our strategic pricing actions as well as tighter promotions helped to offset some level of those tariffs. So we stand ready. And in all honesty, the guidance range that we provided for Q3 assumes a range of outcomes on with specific respect to the receptivity of the customer to those pricing actions that we're taking, knowing that we're not the only ones. And so that level of macro uncertainty is sort of covering the range of guidance, the low end being lower receptivity to our pricing increases and the high end being a more receptive customer to the price increases.

Your next question comes from the line of Corey Tarlowe from Jefferies.

Mary Ellen, could you maybe talk a little bit about kind of 100 days into the business at this point, where you see opportunity for change, where you see opportunity to accelerate innovation, what's working in the business? And then maybe other areas or trends you've seen quarter-to-date that you might want to shed some light on?

Corey, yes, super excited after 100 days and having had a moment to assess the business. I'm very pleased to report that we are already seeing cultural shifts within the organization, ship-from-store being the most recent example where the teams worked together, a greater sense of urgency and purpose and delivered results well ahead of schedule. So we're excited to see that in terms of the momentum and the team efforts here.

As we look forward, we are -- our focus is on growing the customer file. That is truly what we are -- our goal is. And there's 3 immediate areas of focus that we know we need to do that. It's the product, it's the customer journey, and it's the way we work that I just referenced. So changes and innovation that we're working on right away are around marketing mix and attracting more customers. We know that we have an incredible demographic. She holds the largest wealth in this country. It's a growing segment. She's incredibly loyal to the brand she loves, and she wants to look more stylish today than ever. So we're very excited that we have a base of a loyal customer and the opportunity ahead of us immediately is to really think about the marketing mix that will add to that customer file.

In terms of what's working right now, listen, we are in the back half of this year, making slight refinements to our presentations, both in-store and online and to our assets that will be shared both catalog and digital. The focus really is on 2026 and how we drive compelling assortments to attract this customer.

Great. And then just, Mark, could you maybe walk us through some of the puts and takes in margin? Obviously, tariffs was one that was already addressed and talked about, but are there any other considerations in the back half of this year? And how do you see the path to kind of the high teens EBITDA margin continuing and sustaining over the long term? And what do you think the key drivers are to get you there?

Yes, Corey, good questions. Look, I think in the back half of the year, the primary margin story comes down to tariffs. And part of that is the strategy that we're deploying on the strategic pricing and selective pricing. The goal really is to offset the dollar amount of the tariffs versus trying to mark it up and maintain the rate. So that carries with it, out of the gates, full receptivity to the pricing increases, margin pressure. And then as I mentioned, we're providing the closer-in outlook for Q3 that has a range of expectations around that receptivity. So that's the primary. But underneath the covers, some opportunities to offset that through the level of promotions executed in the business, the fact that the inventories are bought as I mentioned, down in the back half of the year, which we feel is a prudent way to position the inventories.

And that's sort of enabling us to continue to manage the business with the discipline of the operating model on display, still cash generative and allowing us to make these investments, which, to your last question, is really the path for us going forward to invest, as Mary Ellen said, in expanding the customer file, the breadth of the assortment, the appeal of the assortment and the marketing mix is really the opportunity to drive profitable growth deliberately in the coming year, which will be the kind of the go-forward story to drive that performance back into the business. In the meantime, we continue those investments. and continue to generate the cash and distribute the cash in support of our TSR strategies as evidenced by the dividend and the share repurchase activity to date.

[Operator Instructions] Your next question comes from the line of Janine Stichter from BTIG.

Mary Ellen, I just wanted to get your thoughts on the state of your consumer. I know your consumer tends to be pretty headline sensitive and they weren't feeling great at the start of Q2. Outside of some of the noise you saw from promotions in Q2 that did drive sequential improvement, how are you feeling today?

Janine, thanks for the question. What we're seeing is the consumer slowly return. And we saw that, again, sequentially month-over-month in Q2, and we're optimistic as we're heading into Q3. I believe as the tariff noise has settled, we have seen her come back into the business, which is very exciting for us.

Great. And then I just want to clarify around the back half promotional levels. Inventory is clean, but obviously, your consumer still is selective and price sensitive. Would you expect promotions to be up year-over-year in the back half down? Or is that still part of the range of outcomes you're contemplating?

Sorry, I was just going to say, as Mark said earlier, that will really depend on the consumer acceptance with our brand as well as our peers of the price increases. And the range that we've put out there, sort of the high end is she's very accepting because we were strategic and thoughtful about where we increase prices. And on the low end is that she is more resistant to the overall cost of purchases moving forward.

Your next question comes from the line of Marni Shapiro from the Retail Tracker.

Nice improvements here, at least in getting some traffic back in the stores. I'm curious if you could talk a little bit, you upgraded your POS systems. Will you, I guess, upgrade, modernize, change anything with Inspired Rewards? I think you have a pretty loyal customer as far as I recall. And will you use that to sort of expand your base of customer? And then I just have one follow-up on that, if you wouldn't mind.

Sure. So Marni, yes, we are very happy to have sort of POS and OMS implementations behind us. And the team is currently working on drafting a reward program that is non-tender because as you know, right now, the JCC, our own credit card program, highly penetrated to our sales and a very loyal audience, and we do have many programs for them. But as I said, the team is working on one that's non-tender and one that we will have rolled out in the back half of the year.

Fantastic. And then you said you were going to -- you launched some TV or you were testing some television. I'm curious what your thoughts are on social media content in real-life events. I feel like your customers, when I'm in your stores, they're all talking to each other. So I'm curious what you think about those 2 aspects of to grab people into your stores.

Yes, great question. So we are very clear that we need to get our message out to more people to drive awareness, all levels of the funnel, and we would say, particularly really looking at top and middle as we've been converting very well on the bottom to grow the customer file. And the television test was very small, and it was very local, but it's super exciting for us because it did have a tremendous impact. And as we look forward to changing the marketing mix, we will absolutely be looking to what you're talking more digital, more direct interaction. That mix going forward will be very different. And honestly, we'll be testing strategically in the back half of the year to really understand how we can free up some resources to really engage these new-to-brands and react as opposed to focusing only on our existing file.

Fantastic. And then can I sneak in just one more. I don't know if I'm projecting on to your stores. But in the last, I think, 2 weeks, even last 1.5 weeks, the stores already look different. They look cleaner. The front of the store looks different. I don't want to say younger, maybe more modern, the way things are paired. Am I projecting on to it? Or have you already made changes in the merchandising without changing the product?

Marni, I love this question. Yes, for the back half of the year, as we have said, because the product was already locked in, what we have done is change the presentation. So both in stores and online. And to your point, making it much easier for the customer to shop, cleaner, cleaner color stories. And honestly, we've rethought what we're doing in windows to make them more compelling. And yes, we are seeing a positive response so far. So very glad to hear that people are noticing. Thank you.

And that concludes our question-and-answer session. I will now turn the call back over to Mary Ellen Coyne for some final closing remarks.

Thank you all for joining us today. We are focused and committed to executing on our objectives, and we look forward to speaking with you again on our next earnings call.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill First Quarter 2025 Earnings Conference Call. [Operator Instructions] Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the J.Jill's SEC filings. The forward-looking statements made on this recording are as of June 11, 2025, and J.Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted or non-GAAP figures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued June 11, 2025. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. And it is now my pleasure to turn today's conference over to Mary Ellen Coyne, Chief Executive Officer and President at J.Jill. Mary Ellen, the floor is yours.

Good morning, and thank you for joining us. I'm very excited to be speaking with you today as the newest member of the J.Jill executive team, having spent the last 3 decades in retail and specifically women's apparel and accessories, I understand what a special brand J.Jill is and the important role we play in serving a very loyal customer base, one that has grown wit time and is often underserved but highly valuable.

Throughout my career, I've learned that successful retail brands are built on authentic connections with customers, and J.Jill has that foundation in place. While we are navigating challenges today, stemming from the current environment, increased uncertainty affecting consumer spending and certain underperforming areas of the assortment, I strongly believe in this brand and the opportunities ahead. It was this belief and my passion for serving this customer that brought me to this role. I have a proven track record of building teams and growing businesses profitably. My background is rooted in product and merchandising, having spent 16 years at Ralph Lauren before moving on to my most recent role as the CEO of J. McLaughlin. I not only have a deep understanding for the industry, but strong admiration for the customer J.Jill serves.

In my previous roles, I have scaled businesses through multichannel expansion, elevating product offerings and introducing new categories. I see opportunities across all those areas here while maintaining the brand's core identity, which has supported such loyalty over the years. Over the past 5 weeks, I have immersed myself in the business. engaging with our teams, visiting stores and talking with associates and customers. I am working diligently to assess all areas of the business where our strengths are, where there are opportunities and how we can evolve and improve performance. This initial review will inform my views on our path forward.

What is clear, however, is the inspiring dedication that I have seen across our organization to delivering customers the experience they value from J.Jill. I am energized by the opportunities ahead and will be working with the team to leverage the investments that have been made in stores, marketing and systems. The fundamentals of this business are here. We have a loyal customer base, a lean operating model and strengthening omnichannel capabilities. I look forward to providing more insights into our plans and initiatives on our September earnings call.

Now I will hand the call over to Mark to review our first quarter performance. Mark?

Thank you, Mary Ellen, and good morning, everyone. I'd like to welcome Mary Ellen to her first earnings call. We are excited to have you leading J. Jill and are energized by your passion for this customer and proven track record driving growth in this industry. We look forward to sharing more on Mary Ellen's assessment of the business and strategies on our second quarter earnings call in September, but for now, let me review our first quarter performance.

We entered first quarter with known challenges. We experienced adverse weather in February, and we cut over to our new OMS system in March. Overall, the OMS project went very well, and we are excited to now have a modern platform from which we can scale and grow, but the cutover did have a slightly larger impact on Q1 performance than anticipated.

In addition to these known headwinds, we believe we had opportunities in the assortment and the macroeconomic environment continued to be volatile with uncertainty related to global trade policy impacting our customers' behavior, particularly in April and into May. Despite these challenges, we delivered EBITDA above the high end of our previously guided range due primarily to disciplined expense management and continue to deploy cash to shareholders through our quarterly dividend and share repurchase program.

While we remain confident in the long-term resiliency of our loyal customer base and the opportunities to grow this business, we continue to navigate near-term uncertainty with respect to tariffs and the impact the ongoing volatility will have on our customer. Because of this and also to provide Mary Ellen with the necessary time to complete her assessment of the business, we are withdrawing our prior full year guidance and temporarily suspending our practice of providing forward guidance on most metrics. I will discuss more on this, but first, let me review more details on our first quarter performance.

Total company sales for the quarter were about $154 million, down 4.9% compared to Q1 2024, inclusive of total company comparable sales decline of 5.7%, which was partially offset by sales from new stores opened last year. Total company sales also reflected a $2 million negative impact from the OMS cutover.

Store sales for Q1 were down about 4.4% compared to Q1 2024, and direct sales, which represented about 47% of total sales in the quarter, were down 5.4% compared to first quarter of fiscal 2024. As mentioned, weather impacted store traffic earlier in the quarter, while the OMS cutover had an outsized impact in our direct channel in March. In addition, our customer became more discerning with her spend in April, which was most pronounced in our direct channel as she primarily shopped markdowns, which put pressure on average unit retails and gross margin.

Q1 total company gross profit was about $110 million, down about $7 million compared to Q1 2024. Q1 gross margin was 71.8%, down 110 basis points versus Q1 2024, driven by higher mix of markdown sales primarily in the direct channel and higher full-price promotional rates in both channels.

SG&A expenses for the quarter were about $91 million compared to approximately $89 million last year. The increase was driven primarily by store expenses associated with 5 incremental new stores compared to prior year, OMS related costs, which came in at $1.6 million versus $700,000 last year, and merit increases, partially offset by lower management incentive accruals.

Adjusted EBITDA was $27.3 million in the quarter compared to $35.6 million in Q1 2024.

Interest expense was $2.8 million in Q1 compared to $6.4 million last year.

Adjusted net income per diluted share was $0.88 compared to $1.22 last year, which reflected a diluted share count of 15.4 million shares this year versus 14.4 million shares last year as well as a benefit of about $0.01 per share related to repurchase activity in the quarter. During the quarter, we repurchased 186,800 shares for approximately $3.5 million. And as of June 11, we have approximately $21 million remaining on the $25 million share repurchase authorization.

Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures, adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations.

Turning to cash flow. For the quarter, we generated about $5.3 million of cash from operations, resulting in ending cash of about $31 million and zero borrowings against the ABL.

Looking at inventory. Total reported inventories were up about 14% at the end of the first quarter compared to end of first quarter last year, primarily due to an extra week in the supply chain we initiated last year in Q2 in response to Red Sea disruption. Excluding this extra week of inventory, normalized inventory was up about 5%, consisting primarily of higher seasonal basic and basic full price inventory, which, while less liable than fashion, will present margin pressure in Q2 as we take select markdowns and implement promotions.

Capital expenditures for the quarter were $2.7 million compared to $2.3 million last year. Investments were focused primarily on stores as well as the completion of the OMS project, including the initiation of work to enable ship in-store capabilities in the back half of this year.

With respect to store count, we closed 3 stores during the first quarter, including the 2 we discussed on our last call that shifted in from the fourth quarter of 2024. We did not open any new stores in the quarter, resulting in end-of-quarter store count of 249 stores compared to 244 stores at end of Q1 last year.

Now for more on our outlook. As I mentioned, given the increased uncertainty with respect to the macroeconomic environment, along with our recent CEO transition, we are withdrawing our prior full year guidance and temporarily suspending our practice of providing forward guidance on most metrics. That said, our teams are diligently working to assess opportunities for improvement within the assortment, and we have taken swift actions to reduce inventory investments in floor sets beginning in the third quarter to better align with current demand trends. Quarter-to-date through May, total company sales are down mid-single digits compared to the prior year period. While comparisons get easier as we move forward, should sales continue to decline at this level, we would expect to see significant SG&A deleverage as well as further pressure on gross margin, driven by actions taken to ensure the movement of inventory in season.

With respect to tariffs, in developing our financial models for the rest of the year, we have assumed tariffs will remain at 10% on all countries and 30% on China. While we expect to begin to see incremental product costs beginning toward the end of the second quarter from tariffs currently in place, we expect to mitigate most of these costs through a combination of vendor negotiations on order adjustments and strategic price increases on select items in the assortment. However, any increases to current rates will result in additional margin headwinds for the year.

We remain committed to operating the business with discipline, tightly managing inventory buys and clearing goods as needed in season and our strong balance sheet and ongoing cash generation enable us to continue to support our strategic investments in marketing, new stores and in systems capabilities such as ship from store, which is in pilot now and will ramp through the back half of 2025.

We are maintaining our current run rate marketing spend in support of the customer file, but are reviewing the mix and creative to ensure maximum impact amidst the broader market backdrop. We are investing in new stores but are evaluating nonessential capital spend. We now expect to spend between $20 million and $25 million during the fiscal year compared to prior guide of approximately $25 million.

We are now expecting to open between 1 and 5 net new stores this year, versus prior guided range of net 5 to 10 new stores as some new deals have pushed into 2026.

And lastly, we remain committed to executing on our total shareholder return strategies. As announced on June 3, we are maintaining our quarterly dividend of $0.08 per share payable on July 9 to shareholders of record on June 25, and we will continue to opportunistically repurchase shares that will do so judiciously until trend visibility improves.

The considerable actions we have taken in the past few years to invest in our systems and strengthen our balance sheet will support us going forward. Our new OMS system is up and running and teams are making progress on the next objective, which is to ramp the ship-from-store capability for benefit in the second half of this year. With funded debt of $74 million and $31 million in cash, we have the necessary flexibility to navigate through this environment and enable us to be better positioned to capitalize on improvement when trends normalize for our customer.

Despite near-term headwinds, we are fortunate to have a strong brand and a very attractive customer. Our teams have managed through challenges such as this before, and I look forward to working with Mary Ellen as she continues to assess and develop plans to position us for long-term success.

Thank you. I'll now hand it back to the operator for questions.

[Operator Instructions] Your first question comes from Dana Telsey with Telsey Group.

Welcome Mary Ellen to J.Jill. As you coming from Jay McGloughlin and Ralph Lauren, you've had experience with this customer. Given the current macro environment, what did you put in place at Jay McLaughlin, for example, during cash, and what do you see the opportunity for J.Jill?

And then lastly, you mentioned certain underperforming parts of the assortment. What are those? And how do you see the merchandise mix evolving for the upcoming holiday season?

And lastly, Mark, on the OMS cutover that you had, are there any other costs that go into the second or third quarter that we should be mindful of? And what magnitude of price increases are you talking? And how promotional is it compared to where it could be?

Dana, it's Mark. I'm going to jump in, if I can, just on the tariff conversation. So we're speaking directly about J.Jill and what we've done around the tariff exposure. We mentioned in my remarks that the overall tariff assumption we're going with right now, though, as everybody knows, the final trade negotiations are not yet landed, and it's unclear when they will be or what potential news flow will be until they are. But we've assumed 10% -- we've kind of assumed status quo here in the pot, 10% everywhere except China and 30% on China. As we've discussed previously, we've made, as a company, great strides getting our China sourcing down below 5%. That continues to be an opportunity for us, and we've been looking at one of our strategies around mitigating tariffs is on-border adjustments, which would include country migration and it includes adjustments in quantities.

We mentioned vendor negotiations. We have a very strong long-standing relationship with our vendor community and our agents. So we're working on those levers and then very select and strategic price increases that the team has gone through and believe there's opportunity to price up strategically within the assortment. All of those things combined for us, we believe, at the current status quo, while it does represent a headwind just given that it's an incremental cost, are manageable within our current environment with respect to tariffs.

You mentioned the assortment. I would say there's opportunity in the assortment around , I think the teams -- and I'll let Mary Ellen jump in on this, but around some newness particularly in times like this where the consumer is a little bit more uncertain. And then we did have some successes in the assortment as well. I know this is an area that Mary Ellen is diving into with the teams.

Thanks, Mark. Dana, it's nice to meet you. I'll start with your first question, which was around customer. And yes, in my experience, both my time at Ralph Lauren and Jay McLaughlin, what I have learned is that the most important thing you can do is to create meaningful relationships with your customer. And J.Jill has done that in [ spades ]. This is a very valued segment. It is traditionally an underserved segment. And so we're very excited that we have her here, and it's a customer that I'm very familiar with. So thrilled about that.

What we know about this customer, in addition is when there are times of uncertainty, she pulls back. She is a smart engaged consumer, one who is more discerning with their spend, and that is what we saw. And to Mark's comments, we did not have enough newness in the assortment, and that will be a focus as we move forward.

In my experience, this customer always returns and returns to the brand that she knows and that she trusts, and we are confident that, that will happen here.

With regard to your question about the holiday season, our product line is bought through the end of the year. But that being said, there is always more that we can do to win share of wallet, and that is my immediate focus with the team right now. We can impact presentations in store and online. We can impact marketing efforts. We can impact the way that we show up for her as we work through the balance of the year.

Great. And I'll just lastly, Dana, you mentioned OMS. Thanks for that question. First of all, I would say we're extremely excited to have our new OMS system in and stable. And we mentioned that there was slightly more negative impact in the cutover than we had anticipated. We had provided guidance that we expected $1.5 million, we came in at $2 million. I'll tell you the extra $502 million in total for a project as far reaching and important as OMS in the grand scheme of things, is a pretty good cutover for us from our perspective. The teams have worked really hard in what we call hypercare, which are the weeks following the cutover to address some unforeseen issues that weren't caught in testing. The $1.5 million we've guided to, we expected and the $500 million that we didn't really came out of some customer-facing issues, some glitches with checkout on the website, some glitches with stored credit cards on the website that we're quickly diagnosed, addressed and fixed so are now behind us. We'll continue to learn the new systems and as we continue to get every day behind us with the new system, we are excited about it. It was a very large project. The cutover went very well. A very large team was dedicated to it, and they did a fantastic job of getting it to where we are today.

And at the same time, we're excited that we're bringing up ship from store, which we talked before was the primary first omni capability that we were going to deploy. We're in pilot. We're in about 10% of the fleet. We're learning. We're fine-tuning and we'll be ramping that through the back half of the year, which should, as we previously discussed, provide value as we ramp it.

Your next question comes from Jonna Kim with TD Cowen.

Just curious on the unit comment how are you thinking about rolling out units in the second half and struggling that with also scale the tariff dynamics are, and how do you feel about the inventory position in the fall and also the holiday season? Again, I would love any color around ticket and traffic during the quarter, if you can provide any details?

Great. Thank you for the question. I'll start with the question around newness again. As I had just said, the line is thought through the end of the year. That being said, we're able to make small adjustments, but really the impact of that will really come as we head into 2026.

And Jonna, I would add -- and I apologize if we missed some of your questions. It was a little hard to hear. Please follow up with us if you can. And operator, if you could allow that. I heard the question on inventory positioning going into fall and holiday. One of the immediate things or the near-term things that we can impact our orders that are coming. So we did take our Q3, which is really the fall and forward buy is down more in line with the current demand trends that we've seen, which is sort of the first part of that. We exited Q1 with normalized inventories. Remember, our balance sheet inventories reflect about an extra week of in-transit and on-hand now related to the extra week we put into the supply chain last year. when the Red Sea issues begin. We'll lap those at the end of Q2, but we're still showing that in our balance sheet. So when we normalize that out, were up about 5%, which is mostly, and we have made some investments in some key basic items, some bottoms that actually did well during the quarter. But as you get into Q2, having inventories up 5, we will do what's necessary to clear our inventories given that we're going to be entering summer sale periods in July and want to exit Q2 clean with those new buys bought more appropriately with demand.

Understood. Yes. The second question just for additional color, taken for is tracking during the quarter and opportunities to drive more traffic to the stores as well.

Yes. So through the quarter, and Q1 for us was choppy. It had weather, which we had spoken about on our last call in February, which impacted traffic in stores. We had the OMS cutover, which impacted direct in March, and that primarily is a conversion type impact, just a little bit of traffic as we brought the site down to cut over. And then really when April and some of the global trade policy announcements kicked off, we saw overall a pullback in demand, and that was traffic. It was also a migration, which we tend to see a migration to markdown selling and promo selling, which impacted AURs maybe even a little more than traffic.

The opportunities, we mentioned that we remain committed to and are fortunate to have the financial model of the business and a strong balance sheet to be able to maintain our strategic investments, one of those in a primary area is marketing and also stores and systems. And the marketing effort will look at mix and creative just in light of the current state of the consumer. And that's as much about near term as it is really about supporting the file for the long term, which we're still very excited about when the customer does come back, and we fully expect her to that we can get back to driving profitable growth.

Your next question comes from Corey Tarlowe with Jefferies.

Great. Mary Ellen, could you maybe talk a little bit about what's driven to J.Jill, some of the characteristics that you see of strength that you think are likely to continue going forward for the business? Any categories where maybe you see some opportunities or green shoots? And then, Mark, just on the quarter-to-date momentum, is there any way to put into context kind of some of the drivers or maybe how that compared relative to what you saw in the first quarter?

Sure. Thanks for the question. For me, as I looked at J.Jill, the opportunity to build upon this brand's strong history while driving future growth was irresistible for me, right? This is what I love to do is scale profitable businesses. In my past experiences, I've done that through multi-channel expansion. I'm a big believer in stores, but the balance here of the e-commerce business to the brick-and-mortar business is really healthy and both able to scale, but I've also elevated product assortment, introduced new categories, and I see tremendous potential to do all of those things here, continuing to serve the very loyal customer that we have and to acquire new ones.

And Corey, I would put context around the Q1 performance into the May trend in this manner. The quarter I mentioned before, was choppy. So we had weather in February and the OMS cutover in March. It really was that slowdown. Once we were through those issues in April, that seem to very much coincide with the uncertainty that started to swirl out in the global trade arena. And so that trend, we honestly didn't anticipate. And the May comment with down mid-single digits is indicating that some of that trend in April continued, as I mentioned in my remarks.

The uncertainty that is out there is, and as Mary Ellen mentioned, with respect to our customer, just creates, in our world, uncertainty in the planning and is a primary reason why we are temporarily suspending our practice of providing guidance. But that also, coupled with having Mary Ellen as new CEO and making sure she has the time to assess and develop plans on the business, which we would plan to come back and share more on in the Q2 call in September.

Your next question comes from Marni Shapiro from the Retail Tracker.

Welcome, Mary Ellen. I feel terrible that you have to start and then tariffs happen, not a fun way welcome award. We're excited to have you. I'm just curious, just a follow-up on the conversation about trends and what's happening out there. May was not a great weather month in the Midwest and the Northeast as well. The stock market was all over the place. I know your customer pays attention to those kinds of things. Have you seen any improvements in areas where the weather was more seasonal? Were the trends different in those areas? Or any improvement as we got towards a little bit away from that noise? Or was May down across the board?

And then just one other quick question. I know you you're talking about ramping up ship from stores, very exciting. But will you be careful, I guess, about split shipments, which other retailers have called out as being very costly and prohibitive? Is that something that's already on your mind?

Marni, it's Mark. Thanks for the questions. I'll start with the second one. Ship from store shipping complete is a big objective. So we're well aware of the shipping cost per unit, et cetera, and that is as we're rolling out and piloting and ramping one of those knobs you can turn and rules you can engage to make sure you're managing it appropriately. So very much aware of that. Very excited about the opportunity to fulfill what was previously unfulfillable demand within our business. So -- but applying learnings as we do so.

And then you mentioned the weather. Honestly, weather is -- it's becoming the new norm, I guess. I would say that across the country, there hasn't really been any major impacts that we would say February was widespread, which is why we called it out. And I think at the time, we mentioned it was everywhere except for the Southwest and Colorado, which seem to be the only bubbles of protected from the weather areas.

The weather in May, no big callouts. We've also been tracking from the political landscape, red states, blue states, we don't see any real major call-outs across any of those differences as we look at them. We see general pullback in our customer segment when things like the stock market volatility increases and uncertainty and worry tend to enter the mindset. So that's kind of how we're looking at things right now and a little bit of that rationale again behind the decision to suspend our guidance for right now, but [indiscernible] through it.

Your next question comes from Janine Stichter with BTIG.

I want to get your thoughts on new store openings. I saw you lowered the number this year. It seems mostly due to timing, but is there any change in the view for plants to add stores over the next few years? And then just curious how the newer stores are performing?

I'll take that. So the question on new stores, we ended up, as we mentioned last quarter, we had a couple of store closures that pushed from last year into this year, which was part of the closure activity in Q1. Overall, the store -- the portfolio of stores that we've opened, we've opened 9 in the last -- a little over a year are performing in line with where we would expect. They are subject to the macro as well. So we're watching that. A couple of learnings in smaller markets where it's a single store market that the ramp may be a little longer than we had expected. But working on that part of the marketing investments will be to support those markets. But overall, Berry remain very excited about the store growth opportunity. The store growth guidance for this year really represents available spaces, and we will not compromise on the quality of the space. We talked a lot about the economics required. We're getting visibility to [indiscernible] list and a potential opening list that we're very comfortable with. The guide this year was more about some slippage that has already occurred with the available spaces we're looking at that are likely to push into 2026. And then we're also, in a couple of areas, working with some uncertainties around planning commissions and FEMA and whether or not the centers that we're in clear those hurdles and then we can work through them. So that's primarily why we guided the stores down a little bit. We still feel comfortable in the 50-store opportunity by the end of 2029, and we'll likely speak more about shorter-term objectives at a later point.

And I'll just add to that, that as I said earlier, J.Jill is in an enviable position having a balanced mix with room to scale both channels, in-store and online. But I feel very strongly about brick-and-mortar retail. I think stores are the best way you can tell your brand story and build authentic customer connections and really grow brand awareness. So we're excited about the growth that's planned into the model as we move forward.

Great. And then just 1 more. I think, Mary Ellen, you alluded to some white space or potential new categories. Anything more you can share there? Or is that something we'll hear more about in September?

We are working on that right now, and we will be sharing all of that in September.

So that concludes our question-and-answer session. And I will now turn the conference back over to Mary Ellen Coyne for closing comments.

Thank you, and thank you all for joining us. As I said earlier, I am energized by the opportunities ahead. While we are navigating a challenging backdrop, we know there is always more that we can do to win our share of wallet, and that is where we are focused. I look forward to sharing more on our plans and my overall assessment of the business on our next earnings call.

Thank you.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Hello, and welcome to the 2025 Annual Meeting of Stockholders of J.Jill Incorporated. Please note that this meeting is being recorded. [Operator Instructions]

It is my pleasure to now turn the meeting over to Mary Ellen Coyne. Mary Ellen, the floor is yours.

Thank you, operator. Good morning, everyone. I'm Mary Ellen Coyne, Chief Executive Officer and President of J.Jill, Inc.; and a member of the company's Board of Directors. I'll be presiding at this meeting, along with Michael Rahamim, the Chairman of our Board of Directors.

On behalf of the Board of Directors of J.Jill, I am pleased to welcome all of you to the 2025 Annual Meeting of Stockholders. It is approximately 8 a.m. Eastern and in accordance with the bylaws of the company, I will now call the meeting to order.

We appreciate you attending our 2025 Annual Meeting. All stockholders were given access to our proxy statement and annual report, which contain information about the company and its business. Additional copies are available online.

Before proceeding to the business of the meeting, I would like to note that all members of J.Jill's Board are attending virtually. [ Donna Reed ] from Equinity Trust Company, LLC, has been appointed as inspector of election in accordance with the company's bylaws. Also participating virtually are representatives of Grant Thornton LLP, whose appointment as the company's auditor for the 2025 fiscal year is up for ratification at this meeting, along with representatives of Hutton Andrews Kurth LLP, who serve as our outside legal counsel. Kathleen Stevens, Senior Vice President, General Counsel, Secretary and ESG of the company, will serve as the secretary of this meeting, and will now cover the rules of the conduct and agenda for the meeting.

Thank you, Michael, and thank you to the stockholders who are attending. The rules of conduct and agenda for the meeting should be visible to you on the Lumi platform. The meeting will be conducted in strict accordance with the rules and agenda. This meeting is held pursuant to a printed notice mailed on or about April 22, 2025. The notice went to each stockholder of record as of April 7, 2025. A list of stockholders entitled to vote at this meeting has been available for the past 10 days.

All documents concerning the call and notice of this meeting will be filed with the records of the company. There are 15,283,043 shares of common stock issued, outstanding and entitled to vote at this meeting. We were informed by the Inspector of Election that the holders of a sufficient number of shares of common stock are represented at this meeting to constitute a quorum. The first proposal before the stockholders of the company is the nomination of 3 Class II directors, 1 Class I director and 1 Class III Director of the company.

The company has a staggered Board comprised of 3 classes of directors. The terms of Class II directors expire by their terms at this annual meeting and any Class II director elected today will hold office until the annual meeting held in 2028 or until a successor is elected and qualified.

The Class I director and the Class III director elected today will hold office until the annual meetings held in 2027 and 2026, respectively. And in each case, until a successor is elected and qualified. To nominate the candidates listed in the proxy statement, I recognize the Chairman of our Board of Directors, Michael Rahamim.

Thank you, Kathleen. I hereby nominate Michael Eck, Shelley Milano and Michael Recht for election as Class III directors of the company. Courtnee Chun for election as Class I, Mary Ellen Coyne for election as Class III Director of the company. These nominees are named and described beginning on Page 7 of the company's proxy statement.

You've heard the motion. Is there a second?

I second.

Since no other nominations have been made in accordance with the bylaws, I hereby declare the nominations closed. The election of directors is now in order. If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed. The second proposal being submitted to stockholders for action is the ratification of the appointment by the Board of Directors of Grant Thornton LLP as the independent registered public accounting firm of the company for the current fiscal year ending on January 31, 2026. I would like to call upon Michael Eck, the Chair of the Audit Committee for the recommendation of the Audit Committee and the Board of Directors in this regard.

Thank you. The Audit Committee has the responsibility of recommending auditors to be appointed by the Board of Directors. On recommendation of the Audit Committee, Board of Directors, unanimously voted to recommend Grant Thornton LLP as the company's independent registered public accounting firm for the current fiscal year ending on January 31, 2026. I move for the ratification of the appointment of Grant Thornton LLP to audit the financial statements of the company for the fiscal year ending January 31, 2026.

You've heard the motion. Is there a second?

I second.

If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed. The third proposal being submitted to stockholders for action is to approve the J.Jill amended and restated 2017 Omnibus Equity Incentive Plan. I would like to call upon Shelley Milano, the Chair of the Compensation Committee, for the recommendation of the Compensation Committee and the Board of Directors in this regard.

Thank you. On recommendation of the Compensation Committee, Board of Directors has unanimously voted to recommend that the stockholders vote to approve the J.Jill Inc. amended and restated 2017 Omnibus equity incentive plan. The proposed amended and restated plan will extend the term of the plan, increase the aggregate number of shares of our common stock that may be delivered pursuant to all awards granted under the plan by 750,000 shares at a 1-year minimum vesting requirement for the awards under the plan, update plan rules regarding the issuance of shares, maintain the planned strong governance features and increase certain award limitations for nonemployee directors.

Discussion of the proposed amended and restated plan appears on Pages 49 through 59 of the proxy statement. I move to approve the amended and restated plan.

You've heard the motion, is there a second?

I second.

If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed. The fourth proposal being submitted to stockholders for action is a nonbinding advisory vote required pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act to approve the compensation paid to our named executive officers as disclosed in our proxy statement, more commonly known as Say on Pay. I would like to call upon Shelley Milano, the Chair of the Compensation Committee for the recommendation of the Compensation Committee and the Board of Directors in this regard.

Thank you. Upon recommendation of the Compensation Committee, the Board of Directors has unanimously voted to recommend that the shareholders vote to approve on an advisory basis, compensation of our named executive officers. As discussed in the Executive Compensation section of the proxy statement, the company believes that its compensation policies and decisions are strongly aligned with our shareholders' interest and consistent with current market practices. The compensation of the company's named executive officers is designed to enable the company to attract and retain talented and experienced executives to lead the company successfully in a competitive environment.

Further discussion of this proposal is on Page 60 of the proxy statement. I move to approve the compensation of the company's named executive officers.

You have heard the motion. Is there a second?

I second.

If you have not yet voted, please do so now before the polls close.

[Voting]

The polls are now closed. I ask that the inspector of election tally the votes of stockholders present at the meeting together with the votes of stockholders by proxy and then report the numbers of votes received for and against the business matters presented at this meeting.

The inspector of election has certified that the tally is complete. I now ask the inspector of elections to report the results of the balloting.

Yes, ma'am. The holders of a majority of the shares of common stock represented at this meeting have voted in favor of electing Michael Eck, Shelley Milano and Michael Recht for election as Class II Directors of the company; Courtnee Chun for election as Class I Director of the company; and Mary Ellen Coyne, for election of Class III Director of the company, ratifying the selection of Grant Thornton LLP as the company's independent auditors for the fiscal year ending on January 31, 2026, approving the J.Jill amended and restated 2017 Omnibus Equity Incentive Plan and approving an advisory basis, the compensation of the company's named executive officers.

I hereby declare that the nominees for directors have been duly elected. The appointment of Grant Thornton LLP has been duly ratified. The amended and restated plan has been duly approved, and the compensation paid to our named executive officers has been duly approved on an advisory basis. I direct the Secretary to file the certified tally with the minutes of this meeting. There being no other business, the Annual Meeting of Stockholders has concluded.